Boyertown Industrial Tools Is Considering a Three-Year Project to Improve

question 69

Multiple Choice

Boyertown Industrial Tools is considering a three-year project to improve its production efficiency.Buying a new machine press for $578,000 is estimated to result in $184,000 in annual pretax cost savings.The press falls in the MACRS five-year class, which has percentage rates starting with Year 1, of 20, 32, 19.20,11.52, 11.52, and 5.76.The salvage value at the end of the project of $162,000.The press also requires an initial investment in spare parts inventory of $19,000, along with an additional $1,500 in inventory for each succeeding year of the project.The inventory will all be recovered when the project ends.If the tax rate is 35 percent and the discount rate is 12 percent, should the company buy and install the machine press? Why or why not?

• A)Yes; the NPV is $51,613.33
• B)Yes; the NPV is $45,602.57
• C)No; the NPV is -$22,311.09
• D)No; the NPV is -$52,918.78
• E)Yes; the NPV is $64,728.29

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Definitions:

Ventromedial Hypothalamus

A region of the brain involved in regulating hunger, satiety, and the body's energy homeostasis.

Thalamus

A major part of the brain located in the center of the brain, acting as a relay station for sensory information and playing a key role in the regulation of consciousness, sleep, and alertness.

Glucagon-like Peptide-1

A hormone involved in the regulation of blood sugar levels by enhancing the secretion of insulin.

Vomiting

The involuntary, forceful expulsion of stomach contents through the mouth.