The Division Director for Natchez Corporation's Mississippi Division,which Operates as an Investment

question 155

Multiple Choice

The division director for Natchez Corporation's Mississippi division,which operates as an investment center,is considering investing in machinery which costs of $2,200,000 and is expected to generate $332,000 in additional operating income.If the division's weighted average cost of capital is 11% and its tax rate is 20%,what is the equipment's EVA?

• A) $23,600
• B) $90,000
• C) $242,000
• D) $332,000

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Definitions:

Perfectly Inelastic

A situation in which the demand for a good or service does not change regardless of a change in price.

Total Revenue

The overall amount of money generated from the sale of goods or services before deducting any expenses.

Price Elasticity of Demand

Measuring how sensitivity to price changes affects the amount of a good demanded.

Eating in Restaurants

Eating in restaurants involves consuming meals prepared and served in a dining establishment outside of the home environment.