MsKent Has $200,000 in an Investment Paying 8% Annual Interest

question 58

Multiple Choice

Ms.Kent has $200,000 in an investment paying 8% annual interest.Her marginal tax rate is 40%.Which of the following statements is false?

• A)Ms.Kent's annual before-tax cash flow from this investment is $16,000.
• B)If the interest is tax-exempt,Ms.Kent's annual after-tax cash flow is $16,000.
• C)If the interest is taxable,Ms.Kent's annual after-tax cash flow is $6,400.
• D)None of the above is false.

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Definitions:

Plantwide Overhead Rate

A single, uniform overhead rate applied throughout a manufacturing plant, calculated by dividing total factory overhead by a chosen allocation base.

Overhead Allocation Base

A measure used to distribute overhead costs among products or services, often based on direct labor hours, machine hours, or direct labor costs.

Manufacturing Overhead

All the indirect costs associated with manufacturing a product, such as utilities, maintenance, and factory equipment depreciation, not directly traceable to a specific product.

Activity Cost Drivers

Refers to factors that influence or contribute to the expenses associated with different business activities.