6-17 A rough rule of thumb for the chemical industry is that $1 of annual sales requires $2 of fixed- capital investment In a chemical processing plant where this rule applies, the total capital investment is $2,500,000, and the working capital is 20 percent of the total capital investment. | The annual total product cost amounts to $1,500,000. If the income tax rates on gross earnings total 35 percent, determine the following: a. Percent of total capital investment returned annually as gross earnings b. Percent of total capital investment returned annually as net profit

Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter17: Financial Markets
Section: Chapter Questions
Problem 16RQ: What is a capital gain?
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6-17 A rough rule of thumb for the chemical industry is that $1 of annual sales requires $2 of fixed-
capital investment In a chemical processing plant where this rule applies, the total capital
investment is $2,500,000, and the working capital is 20 percent of the total capital investment.
1
The annual total product cost amounts to $1,500,000. If the income tax rates on gross earnings
total 35 percent, determine the following:
a. Percent of total capital investment returned annually as gross earnings
Percent of total capital investment returned annually as net profit
b.
Transcribed Image Text:6-17 A rough rule of thumb for the chemical industry is that $1 of annual sales requires $2 of fixed- capital investment In a chemical processing plant where this rule applies, the total capital investment is $2,500,000, and the working capital is 20 percent of the total capital investment. 1 The annual total product cost amounts to $1,500,000. If the income tax rates on gross earnings total 35 percent, determine the following: a. Percent of total capital investment returned annually as gross earnings Percent of total capital investment returned annually as net profit b.
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