Byron Corp

question 16

Multiple Choice

Byron Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $100,000. The equipment will have an initial cost of $400,000 and have a 5-year life. The salvage value of the equipment is estimated to be $75,000. If the hurdle rate is 15%, what is the approximate net present value? Ignore income taxes.

• A) Negative $27,490
• B) Zero
• C) Positive $400,000
• D) Positive $75,000

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Definitions:

Suspensory Ligaments

Fibrous tissues that connect the lens of the eye to the ciliary body, adjusting the lens shape for focusing.

Retina

The light-sensitive layer at the back of the eye, containing cells that detect light and colors, converting them into electrical signals sent to the brain.

Ciliary Muscles

A ring of smooth muscle in the eye's middle layer that controls the lens's shape for focusing.

Pupil

Circular opening in the iris through which light enters the eye.