Axios Is a Software Manufacturer The After-Tax Cash Flows from Selling the Old Equipment Are

question 31

Multiple Choice

Axios is a software manufacturer. Managers are considering a new equipment proposal. The income tax rate is 40%, and the discount rate is 10%. The following data are available: $\begin{array}{lcc}&\underline{\text { Old Equipment}}& \underline{\text {New Equipment }}\\\text { Purchase cost } & \$ 12,000 & \$ 36,000 \\\text { Annual depreciation } & 1,500 & 4,500 \\\text { Remaining useful life (years) } & 8 & 8 \\\text { Current selling price } & 14,400 & \text { not applicable } \\\text { Selling price in 8 years } & 1,000 & 2,000 \\\text { Annual operating costs } & 14,000 & 8,000\end{array}$ The after-tax cash flows from selling the old equipment are:

• A) $11,040
• B) $12,000
• C) $13,440
• D) $12,960

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Definitions:

Experimental Drug

A pharmaceutical compound that is in the process of being tested for effectiveness and safety in treating a particular disease or condition but has not yet received governmental approval for general use.

Placebo

A substance with no therapeutic effect, used as a control in testing new drugs.

Control Group

In experimental research, this is the group of participants not exposed to the experimental treatment, serving as a baseline to compare with the experimental or treatment group.

Double-blind Study

A research experiment in which neither the participants nor the experimenters know who is receiving a particular treatment, eliminating bias in the results.