(Appendix 8C)Pont Corporation Has Provided the Following Information Concerning a Capital

question 16

Multiple Choice

(Appendix 8C) Pont Corporation has provided the following information concerning a capital budgeting project: The company's income tax rate is 30% and its after-tax discount rate is 10%.The working capital would be required immediately and would be released for use elsewhere at the end of the project.The company uses straight-line depreciation on all equipment.Assume cash flows occur at the end of the year except for the initial investments.The company takes income taxes into account in its capital budgeting. The total cash flow net of income taxes in year 2 is:

• A)$90, 000
• B)$54, 000
• C)$130, 000
• D)$103, 000

---

Definitions:

Ex-rights Date

The date on which a stock trades without the right to receive a specific dividend or distribution announced by the company.

Rights Offering

A financial mechanism by which a company offers existing shareholders the opportunity to purchase additional shares at a discounted price before the public.

Record Date

The cut-off date used by companies to determine which shareholders are eligible to receive a dividend or participate in a corporate action.

Venture Capitalists

Investors who provide capital to startups and early-stage companies with high growth potential in exchange for equity, or partial ownership.