Clemente Company Is Considering the Purchase of a New Machine

question 4

Multiple Choice

Clemente Company is considering the purchase of a new machine for $160,000. The machine would generate an annual cash flow before depreciation and taxes of $62,588 for four years. At the end of four 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)($45,952)
• B)$162,640
• C)$30,080
• D)$2,640

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Definitions:

Mobile Connectivity

The ability of devices to connect to the internet or to each other wirelessly, enabling mobile communication and access to information.

Decision Making

The act or process of making choices or selecting options, often involving analysis and evaluation.

Problem Solving

The process of identifying a problem, discovering the reasons behind the problem, and finding practical solutions to overcome the problem.

Gamification Devices

Tools or technologies that apply game design elements in non-game contexts to engage and motivate people.