(Ignore Income Taxes in This Problem

question 88

Multiple Choice

(Ignore income taxes in this problem. ) An expansion at Fenstermacher,Inc. ,would increase sales revenues by $315,000 per year and cash operating expenses by $186,000 per year.The initial investment would be for equipment that would cost $405,000 and have a 5 year life with no salvage value.The annual depreciation on the equipment would be $81,000.The simple rate of return on the investment is closest to:

• A)31.9%
• B)15.2%
• C)20.0%
• D)11.9%

Acknowledge the role of information and perspectives in effective decision-making during crises.

Identify the characteristics of and approaches to programmed and nonprogrammed decisions.

Understand the role and limitations of economic models in explaining real-world phenomena.

Comprehend that economists use assumptions to simplify the complex world and facilitate understanding.

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Definitions:

CCA Pool

A grouping method for depreciating assets in a way that combines similar assets for the purposes of calculating capital cost allowance for tax purposes.

Marginal Tax Bracket

The tax rate that applies to the last dollar of an individual's income, used to determine the tax impact of additional income.

Net Cash Flow

The difference between a company's cash inflows and outflows within a given period.

CCA Class

Refers to a classification within the Capital Cost Allowance system in Canada, dictating the depreciation rate for tax purposes on different types of assets.