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

question 39

Multiple Choice

(Appendix 8C) Strathman Corporation has provided the following information concerning a capital budgeting project: The company uses straight-line depreciation on all equipment. The income tax expense in year 2 is:

• A)$33, 000
• B)$48, 000
• C)$9, 000
• D)$24, 000

---

Definitions:

ROE

Return On Equity; a measure of a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.

Debt

An amount of money borrowed by one party from another, often used by companies and governments to finance projects and operations.

Risk

The potential for losing something of value, often used in the context of investments where there is a possibility of financial loss.

Variable Cost Ratio

The proportion of variable costs to sales revenue, indicating how much variable cost changes with a change in the company's production volume.