XYZ Buys a 24 Per Cent Share in ABC for $80m.ABC's

question 42

Multiple Choice

XYZ buys a 24 per cent share in ABC for $80m.ABC's total net profit is $50m and it pays $4m in dividends to XYZ.
-Using the cost method,what would be the revenue and investment amounts at year-end for this investment?

• A) $4m and $80m
• B) $4m and $84m
• C) $12m and $80m
• D) $12m and $92m

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Definitions:

Project Profitability Index

The ratio of the net present value of a project’s cash flows to the investment required.

Net Present Values

refers to the calculation that determines the present value of a series of future cash flows by discounting them at a certain rate, often used for assessing the profitability of investments.

Incremental Cost Approach

An analysis method that evaluates the additional costs of making decisions, comparing the costs that change with the decision versus those that do not change.

Purchase Cost

The amount paid to buy goods, materials, or assets.