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

question 113

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 2, the annual incremental after-tax cash flow from operations for year 2 is ________. (See Table 11.4)

• A) $18,000
• B) $24,000
• C) $66,000
• D) $84,000

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Definitions:

Favorite Bundle

In consumer theory, the combination of goods and services that maximizes a consumer's satisfaction or utility, given their budget constraint.

Absolute Values

A measure representing the magnitude of a number regardless of its direction or sign, shown as the distance from zero on a number line.

Favorite Bundle

An individual consumer's most preferred combination of goods and services, given their budget and prices.

Indifference Curve

A graph showing different combinations of two goods among which a consumer is indifferent, depicting levels of consumption where the consumer has no preference for one bundle over another.