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Click on each question to check your answer.
1. How would you calculate your taxable income?
Sum up your income from all sources to get the gross income, and then subtract the relevant deductions to give the taxable income. (p. 369)
2. What are the major differences between engineering economy studies and accounting practices to determine what will happen?
Engineering economists look forward and try to predict what may happen while accountants measure what has happened. Moreover, accountants allocate funds in time to match them to units or products while engineering economy is concerned with when the cash flows occur. (p. 376)
3. What are the principal accounting statements that deal with cash flows?
They are: the income statement, which tells what happened over the past year, and the cash flow statement, which lists the sources and uses of cash. (p. 376)
4. What is the net cash flow from operations?
The net cash flow from operations refers to net profit plus capital cost allowance minus dividends. (p. 378)
5. What is the nominal relationship between before-tax and after-tax return when dealing with non-depreciable assets?
The relationship is as follows: After-tax rate of return = (1- Marginal tax rate) x (Before-tax rate of return). (p. 393)