Firm B Produce Gadgets

question 29

Multiple Choice

Firm B produce gadgets.The price of gadgets is $2 each.Firm B has total fixed costs of $300,000 and variable costs of $1.40 per gadget.The corporate tax rate is 30%.If the economy is strong,the firm will sell 2,000,000 gadgets.If the economy enters a recession it will sell only half as many gadgets.If the economy is strong,the after-tax profit of Firm B will be _________.

• A) $90,000
• B) $210,000
• C) $300,000
• D) $630,000

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Definitions:

Dividend

A portion of a company's earnings distributed to shareholders, representing a share of the corporate profits.

Noncumulative Preferred Stock

A type of preferred stock where missed dividend payments are not accumulated. Investors are not entitled to claim missed dividends in the future.

Par Common Stock

The face value of common stock as stated in the corporate charter; often a nominal amount that has no relation to its market price.

Dividend

A payment made by a corporation to its shareholders, usually as a distribution of profits.