Reference no: EM132490953

Question 1. What effect would a $10.66 million operating expense have on this? year's earnings? What effect would it have on next? year's earnings?? (Select all the choices that? apply.)

A. A $10.66 million operating expense would be immediately? expensed, increasing operating expenses by $ 10.66 million. This would lead to a reduction in taxes of 35 % times $ 10.66 million equals $ 3.73 million 35%× $10.66 million=$3.73 million.

B. A $10.66 million operating expense would be immediately? expensed, increasing operating expenses by $10.66 million. This would lead to an increase in taxes of 35 % times $ 10.66 million equals $ 3.73 million 35%× $10.66 million=$3.73 million.

C. Earnings would decline by $ 10.66 million minus $ 3.73 million equals $ 6.93 million$10.66 million-$3.73 million=$6.93 million. There would be no effect on next? year's earnings.

D. Earnings would decline by $ 10.66 million minus $ 3.73 million equals $ 6.93 million$10.66 million-$3.73 million=$6.93 million. The same effect would be seen on next? year's earnings.

Question 2. What effect would a $10.05 million capital expense have on this? year's earnings if the capital is depreciated at a rate of $2.01 million per year for five? years? What effect would it have on next? year's earnings? (Select all the choices that? apply.)

A. Capital expenses do not affect earnings directly.? However, the depreciation of $2.01 million would appear each year as a capital expense.

B. Capital expenses do not affect earnings directly.? However, the depreciation of $2.01 million would appear each year as an operating expense.

C. With an increase in taxes of 35 % times $ 2.01 million equals $ 0.7 million35%×$2.01 million=$0.7 million?, earnings would be higher by $ 2.01 million minus $ 0.7 million equals $ 1.31 million$2.01 million-$0.7 million=$1.31 million for each of the next 5 years.

D. With a reduction in taxes of 35 % times $ 2.01 million equals $ 0.7 million35%×$2.01 million=$0.7 million?, earnings would be lower by $ 2.01 million minus $ 0.7 million equals $ 1.31 million$2.01 million-$0.7 million=$1.31 million for each of the next 5 years.