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

question 42

Multiple Choice

(Appendix 8C) Prudencio Corporation has provided the following information concerning a capital budgeting 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 income tax expense in year 3 is:

• A)$21, 000
• B)$12, 000
• C)$9, 000
• D)$33, 000

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Definitions:

Flywheel

A mechanical device specifically designed to efficiently store rotational energy, which helps stabilize the speed of an engine.

Torque Converter

The torque converter connects the engine’s crankshaft to the input shaft of an automatic transmission.

Input Shaft

The shaft in a gearbox that receives power from the engine or motor to be distributed through the gears to the output shaft.

Transmission Switch

A device within a vehicle's transmission system that controls various functions based on the vehicle's gear position.