Computing the Terminal-Year FCF: Babaloo Nightclubs Purchased a Disco Mirror

question 18

Multiple Choice

Computing the terminal-year FCF: Babaloo Nightclubs purchased a disco mirror that currently has a book value of $10,000. If Babaloo sells the disco mirror for $500 today, then what is the amount of cash that it will net after taxes if the company is subject to a 39 percent company tax rate?

• A) $500
• B) $3,705
• C) $4,205
• D) $9,500

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Definitions:

Innovation

The first commercially successful introduction of a new product, use of a new method of production, or creation of a new form of business organization.

Property Value

The market worth of a property, including land and any buildings on it, influenced by location, condition, and market trends.

Market System

A market system is an economic system in which decisions regarding investment, production, and distribution are based on supply and demand, and prices are determined in a free price system.

Property Rights

Property rights are the legal rights to use, control, and dispose of property, including land, buildings, or intellectual property.