Tom's Donuts Can Invest in a New Espresso Machine That

question 147

Multiple Choice

Tom's Donuts can invest in a new espresso machine that costs $300 and will yield expected profits of $200 each year for two years. What is the present discounted value of the expected profits from this investment if the interest rate is 5%?

• A) $185.93
• B) $276.64
• C) $371.89
• D) $380.96

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Definitions:

Direct Method

A cost allocation technique that assigns support department costs directly to producing departments without any intermediate allocation steps.

Janitorial Department

A dedicated division within an organization responsible for cleaning and maintaining the premises.

Cost Allocated

The process of distributing indirect costs to different departments, products, or projects within an organization.

Sales Department

The division within a business focused on sales and customer acquisition strategies.