(Appendix 13C) Reye Corporation Has Provided the Following Information Concerning

question 66

Multiple Choice

(Appendix 13C) Reye Corporation has provided the following information concerning a capital budgeting project:
The company's income tax rate is 30% and its after-tax discount rate is 9%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting.
-The total cash flow net of income taxes in year 2 is:

• A) $60,000
• B) $110,000
• C) $18,000
• D) $92,000

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Definitions:

Teratogens

Substances that during pregnancy can cause development disorders or birth defects in the unborn child.

Enzyme

Biological molecules that significantly speed up the rate of virtually all of the chemical reactions within cells.

Metabolizes Alcohol

The process by which the body breaks down alcohol, primarily through the liver, into substances that can be eliminated.

Fetal Alcohol Syndrome

A condition resulting from alcohol exposure during the mother's pregnancy causing brain damage and growth problems in the child.