Table 11.4 Computer Disk Duplicators, Inc. Has Been Considering Several Capital Investment

question 4

Multiple Choice

Table 11.4
Computer Disk Duplicators, Inc. has been considering several capital investment proposals for the year beginning in 2004. For each investment proposal, the relevant cash flows and other relevant financial data are summarized in the table below. In the case of a replacement decision, the total installed cost of the equipment will be partially offset by the sale of existing equipment. The firm is subject to a 40 percent tax rate on ordinary income and on long-term capital gains. The firm's cost of capital is 15 percent.
*Not applicable
-For Proposal 1, the annual incremental after-tax cash flow from operations for year 1 is ________. (See Table 11.4)

• A) $60,000
• B) $255,000
• C) $300,000
• D) $210,000

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Definitions:

Industrial Rock

Minerals and rocks exploited for their economic value that are not primarily sourced for their gem or precious metal content, such as limestone or sandstone.

Iron Ore

Naturally occurring rocks and minerals from which metallic iron can be economically extracted.

Gypsum

A common calcium sulfate mineral, generally formed by the evaporation of water.

Clay

A fine-grained natural soil material containing clay minerals, known for its plasticity when wet and used in ceramics.