CTP · Question #268
(Topic 3) Kensley Biscuit Company Ltd. decides to invest £125,000 in new packaging equipment to help it keep up with increased demand. As a result of this investment, the company's annual profit…
The correct answer is D. Translation. A company with $50 million in foreign assets decides to increase its foreign debt by $40 million for a debt ratio of 80%. This action will reduce which exposure?
Question
- (Topic 3)
Kensley Biscuit Company Ltd. decides to invest £125,000 in new packaging equipment to help it keep up with increased demand. As a result of this investment, the company’s annual profit improves by £11,763. If Kensley’s cost of capital is 8.25% and its corporate tax rate is 42%, what is its residual income (RI) from the investment?
Options
- AHedged
- BEconomic
- CTransaction
- DTranslation
How the community answered
(36 responses)- A6% (2)
- B3% (1)
- C11% (4)
- D81% (29)
Explanation
A company with $50 million in foreign assets decides to increase its foreign debt by $40 million for a debt ratio of 80%. This action will reduce which exposure?
Topics
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