Dahlia Corporation, Which Is Subject to a 30% Income Tax

question 89

Multiple Choice

Dahlia Corporation, which is subject to a 30% income tax rate, is considering a $420,000 asset that will result in the following over its six-year life:
Average revenue: $920,000
Average operating expenses (excluding depreciation) : $770,000
Average depreciation: $70,000
The after-tax accounting rate of return on the initial investment is:

• A) 13.33%.
• B) 19.05%.
• C) 25.00%.
• D) 35.71%.
• E) None of the other answers are correct.

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Definitions:

Innovation

The act of introducing something new, such as an idea, method, or device, which is aimed to improve processes, products, or services.

Corporate Venturing

The practice of a large company funding new, innovative projects or startups to explore new markets or technologies.

Venture Creation

The process of conceiving, developing, and bringing a new business or enterprise into existence.

Acquisition Strategies

Plans developed by businesses to successfully buy out or merge with other companies.