MakeitRite Company Is Considering the Purchase of a New Machine

question 18

Multiple Choice

MakeitRite Company is considering the purchase of a new machine for $80,000. The machine would generate an annual cash flow before depreciation and taxes of $28,778 for five years. At the end of five years, the machine would have no salvage value. The company's cost of capital is 12 percent. The company uses straight-line depreciation with no mid-year convention and has a 40 percent tax rate. What is the net present value for the machine?

• A)$-0-
• B)$5,318
• C)$85,318
• D)$23,744

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Definitions:

War Strategy

A plan of action or policy designed to achieve a major or overall aim in warfare.

Guerrilla Tactics

Guerrilla tactics are unconventional warfare strategies used by a smaller force to combat a larger, more conventionally organized military, often including surprise attacks, sabotage, and use of the terrain to harass and undermine the enemy.

American Mainland

Refers to the continental part of the United States excluding Alaska, Hawaii, and other offshore territories.