Anthony Operates a Part Time Auto Repair Service

question 93

Multiple Choice

Anthony operates a part time auto repair service. He estimates that a new diagnostic computer system will result in increased cash inflows of $1,500 in Year 1, $2,100 in Year 2, and $3,200 in Year 3. If Anthony's required rate of return is 10%, then the most he would be willing to pay for the new diagnostic computer system would be (Ignore income taxes.) : Use Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided.

• A) $4,599
• B) $5,501
• C) $5,638
• D) $5,107

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Definitions:

Equivalent Units

A concept in cost accounting used to allocate costs evenly in processes where incomplete units complicate direct measurement.

Assembly Department

A specialized department within a manufacturing facility where components are assembled into final products.

Equivalent Units

A measure used in the costing of products in process, which converts partially completed goods into an equivalent number of fully completed units.

Weighted-average

A mathematical calculation that takes into account the varying degrees of importance of the numbers in a data set, assigning more weight to some numbers than others.