Author Question: Durango Corporation's Midwestern region operates as an investment center. Rich Ruhlman, the ... (Read 65 times)

desireelg_7 · **on:** Feb 5, 2023

Question 1

Jumbo Industries is considering the purchase of equipment costing $80,000. The company has a 12% required minimum rate of return. The equipment is expected to generate $20,000 in additional operating income. Jumbo's tax rate is 25% and its weighted-average cost of capital is 12%. What is the equipment's EVA?
◦ $9,600
◦ $7,200
◦ $2,400
◦ $5,400

Question 2

Durango Corporation's Midwestern region operates as an investment center. Rich Ruhlman, the division's manager, has set a 15% required minimum rate of return. Ruhlman is considering investing in computerized manufacturing equipment with a cost of $220,000. The equipment is expected to generate $65,000 in additional operating income. What is the equipment's residual income?
◦ $65,000
◦ $32,000
◦ $33,000
◦ None of these answer choices are correct

bleep bloop · **Reply #1 on:** Feb 5, 2023

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