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

question 14

Multiple Choice

(Appendix 8C) Brogden 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 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)$137, 000
• B)$170, 000
• C)$67, 000
• D)$110, 000

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Definitions:

Output

The amount of goods or services produced by a person, machine, factory, or entire economy in a certain period.

Returns To Scale

A concept in economics that describes how the output of a production process changes as the scale of production inputs changes.

Production Function

A mathematical model that describes the relationship between inputs used in production and the resultant output.

Isoquant

An isoquant is a curve depicting all combinations of inputs which produce the same level of output, used in the study of production theory.