Use the Information for the Question(s)below

question 90

Multiple Choice

Use the information for the question(s) below.
Ford Motor Company is considering launching a new line of hybrid diesel-electric 4WDs. The heavy advertising expenses associated with the new 4WD launch would generate operating losses of $40 million next year. Without the new 4WD, Ford expects to earn pre-tax income of $75 million from operations next year. Ford pays a 25% tax rate on its pre-tax income.
-The amount that Ford Motor Company owes in taxes next year without the launch of the new 4WD is closest to:

• A)$13.55 million
• B)$18.75 million
• C)$8.75 million
• D)$16.75 million

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Definitions:

Inventory Rises

An increase in the quantity of goods that a company holds, which could indicate either growing sales or overproduction.

Revolving Credit

Revolving credit is a flexible funding option where credit is automatically renewed as debts are paid off, up to a certain limit.

Promissory Note

A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.

Line of Credit

A Line of Credit is a flexible loan from a bank or financial institution allowing the borrower to draw funds up to a specified limit at any time.