Wilson Corp

question 82

Multiple Choice

Wilson Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $50,000. The equipment will have an initial cost of $600,000 and have an 8-year life. The salvage value of the equipment is estimated to be $100,000. If the hurdle rate is 10%, what is the approximate net present value?

• A) Less than zero
• B) $100,000
• C) $500,000
• D) $46,826

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Definitions:

Market Efficiency

a condition in which asset prices fully reflect all available information.

Well-Organized Markets

Refers to financial markets that are structured efficiently, facilitating the seamless exchange of securities.

Dollar Return

The total gain or loss on an investment expressed in monetary terms, considering both capital gains and dividends or interest.

Shares

Portions of ownership in a corporation or financial entity, shares guarantee an equal share in dividend payouts, contingent on profit declarations.