Overland Company Has Gathered the Following Data on a Proposed

question 161

Multiple Choice

Overland Company has gathered the following data on a proposed investment project: $\begin{array} { l r } \text { Investment in Depreciable Equipment } & \$ 150,000 \\\text { Annual Cash Flows } & \$ 40,000 \\\text { Life of the Equipment } & 10 \text { years } \\\text { Salvage Value } & - 0 - \\\text { Discount Rate } & 10 \%\end{array}$ The internal rate of return on this investment is closest to which of the following? (Ignore income taxes in this problem.)

• A) 10%.
• B) Less than 10%.
• C) Between 10% and 20%.
• D) Greater than 20%.

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Definitions:

Exemption

Information included on tax forms that lowers taxes; exemptions include dependents as well as the taxpayer.

Taxable Income

The portion of income used to calculate how much tax an individual or a corporation owes to the government, after all deductions and exemptions.

Taxpayer

An individual or business entity that is obligated to make payments to governmental authorities in the form of taxes.

Tax Tables

Charts or tables provided by tax authorities that display tax rates and brackets for calculating taxes owed based on income levels.