Prudencio Corporation Has Provided the Following Information Concerning a Capital

question 142

Multiple Choice

Prudencio Corporation has provided the following information concerning a capital budgeting project: The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting.
Use Exhibit 7B-1, to determine the appropriate discount factor(s) using the tables provided.
The net present value of the entire project is closest to:

• A) $85,282
• B) $139,420
• C) $245,282
• D) $168,000

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Definitions:

Expenditure Decisions

Expenditure decisions involve choosing how to allocate resources among various options for spending, often evaluating costs and benefits to achieve financial objectives.

Capital Stock

The total common and preferred shares that a company is authorized to issue, representing the ownership of the company.

Straight-Line

A method of calculating depreciation of an asset that evenly spreads the cost over its useful life.

Useful Life

The estimated duration a fixed asset is expected to be economically usable, with normal repairs and maintenance, for its intended purpose.