AICPA Exam CPA-Business Topic 1 Question 84 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 84
Topic #: 1

For the next 2 years, a lease is estimated to have an operating net cash inflow of $7,500 per annum, before adjusting for $5,000 per annum tax basis lease amortization, and a 40% tax rate. The present value of an ordinary annuity of $1 per year at 10% for 2 years is $1.74. What is the lease's after-tax present value using a 10% discount factor?

A$2,610

B$4,350

C$9,570

D$11,310

Show Suggested Answer

Suggested Answer: C

Choice 'c' is correct. Return on investment equals net income divided by average invested capital:

Choices 'a', 'b', and 'd' are incorrect, per the above calculation.

by Cecilia at Apr 10, 2024, 06:17 AM

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