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

question 116

Multiple Choice

(Appendix 8C) Erling Corporation has provided the following information concerning a capital budgeting project: The company's income tax rate is 35% and its after-tax discount rate is 15%.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 3 is:

• A)$115, 500
• B)$140, 000
• C)$80, 500
• D)$180, 500

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Definitions:

Positively Correlated

A relationship between two variables where an increase in one variable is associated with an increase in the other variable.

Students' Heights

The measurement of how tall students are, often collected for health, research, or administrative purposes.

Respective Weights

The individual importance or influence assigned to different factors or variables in a calculation, decision-making process, or model.

Representative

Someone who acts on behalf of another person or group, or an example that typifies or stands for a larger group or class.