Longbow Lumber Is Purchasing a New Horizontal Resaw at a Cost

question 57

Multiple Choice

Longbow Lumber is purchasing a new horizontal resaw at a cost of $375,000.There is an additional $10,000 delivery and installation cost.The machine has a capital cost allowance (CCA) rate of 20%.What is the incremental undepreciated capital cost (UCC) for year 2?

• A)$375,000
• B)$337,500
• C)$385,000
• D)$346,500
• E)$192,500

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Definitions:

Earnings

The profit a company generates over a specific period, indicating its financial performance.

EPS

Earnings Per Share, a key financial metric that divides a company's profit by the number of its outstanding shares of common stock.

Business Risk

Refers to the potential threats to a company's operations or profitability that arise from internal or external factors.

Financial Leverage

The use of borrowed funds with the aim to increase the returns on equity by financing projects with debt rather than equity.