People's Construction Company Has Set a 15% Required Minimum Rate

question 17

Multiple Choice

People's Construction Company has set a 15% required minimum rate of return.The company's CFO is considering investing in a $125,000 crane that is expected to generate $25,000 of additional operating income.People's weighted-average cost of capital is 10% and its tax rate is 30%.What is the crane's EVA?

• A) $5,000
• B) $12,500
• C) $17,500
• D) $100,000

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Definitions:

Sunflower Seeds

Edible seeds from the sunflower plant, often eaten as a snack, used in recipes, or processed for their oil.

Chemicals

Chemicals are substances formed from chemical reactions between elements or compounds, and they have specific chemical compositions and properties.

Production Possibilities

Different combinations of goods and services that an economy can produce using all of its resources efficiently.

Opportunity Costs

The cost of forgoing the next best alternative when making a decision, representing the potential benefits an individual, investor, or business misses out on when choosing one alternative over another.