MULTIPLE CHOICE A loan of P200,000 intended to finance a capital investment project, which was expected to bring in a return of 10%, was obtained by ABC Company from a bank which charges an interest of 12%. At the time ABC Company implemented the project, the income tax rate was 30%. Given this scenario, was ABC’s decision to invest a good decision? • Yes, because ABC earned from the investment. • No, because ABC obviously lost money since the interest paid to the bank was higher than the earnings from the investment. • Answer not given. • I have no idea.
MULTIPLE CHOICE A loan of P200,000 intended to finance a capital investment project, which was expected to bring in a return of 10%, was obtained by ABC Company from a bank which charges an interest of 12%. At the time ABC Company implemented the project, the income tax rate was 30%. Given this scenario, was ABC’s decision to invest a good decision? • Yes, because ABC earned from the investment. • No, because ABC obviously lost money since the interest paid to the bank was higher than the earnings from the investment. • Answer not given. • I have no idea.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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MULTIPLE CHOICE
A loan of P200,000 intended to finance a capital investment project, which was expected to bring in a return of 10%, was obtained by ABC Company from a bank which charges an interest of 12%. At the time ABC Company implemented the project, the income tax rate was 30%. Given this scenario, was ABC’s decision to invest a good decision?
• Yes, because ABC earned from the investment.
• No, because ABC obviously lost money since the interest paid to the bank was higher than the earnings from the investment.
• Answer not given.
• I have no idea.
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