The Munsell Colour Company Is Considering the Purchase of a New

question 6

Multiple Choice

The Munsell Colour Company is considering the purchase of a new batch polymer-bonding machine for producing its number one line of crayons. Although the machine being considered will not produce any increase in sales revenues, it will result in the before-tax reduction of labour costs by $200,000 per year. The machine has a purchase price of $250,000, and it would cost an additional $10,000 to install the machine. In addition, to operate this machine, inventory must be increased by $15,000. The machine is categorized as 10-year property. After 2 years, it can be sold for $150,000. The tax rate is 34% and the cost of capital is 15%. Operating expenses are expected to increase by 2.5%. What are the terminal year cash flows? MACRS Depreciation Rates
$$\begin{array} { | c | c | c | } \hline \text { Year } & \mathbf { 1 0 - Y e a r } & \mathbf { 1 5 } - \text { Year } \\\hline 1 & 10.00 \% & 5.00 \% \\\hline 2 & 18.00 \% & 9.50 \% \\\hline 3 & 14.40 \% & 8.55 \% \\\hline\end{array}$$

• A)$147,912
• B)$155,139
• C)$170,139
• D)$320,139
• E)$328,860

---

Definitions:

Sigmund Freud

An Austrian neurologist who founded psychoanalysis, a method for treating psychopathology through dialogue between a patient and a psychoanalyst.

Free Association

A method used in psychoanalysis where the patient freely shares any thoughts that arise without filtering them, aimed at uncovering subconscious thoughts and emotions.

Embarrassing Childhood Experience

Any memorable event from childhood that caused significant embarrassment and has potential long-term psychological impact.

Therapist

A professional trained to treat mental or psychological disorders and difficulties through various methods of therapy.