$$\text { Reference: } 10 - 02$$ Oriental Company Has Gathered the Following Data on a Proposed

question 86

Multiple Choice

$$\text { Reference: } 10 - 02$$ Oriental Company has gathered the following data on a proposed investment project: $$\begin{array} { | l | l | } \hline \text { Investment in depreciable equipment } & \$ 200,000 \\\hline \text { Annual net cash flows } & \$ 50,000 \\\hline \text { Life of the equipment } & 10 \text { years } \\\hline \text { Salvage value } & \$ 20 \\\hline \text { Discount rate } & 10 \% \\\hline\end{array}$$ The company uses straight-line depreciation on all equipment.
-The net present value of this investment would be?

• A)$200,000.
• B)$77,200.
• C)$107,250.
• D)($14,350).

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Definitions:

Allowance for Doubtful Accounts

An accounting estimate for the portion of accounts receivable that may not be collectible.

Bad Debt Expense

An expense account reflecting estimated uncollectible accounts receivable due to credit sales that are unlikely to be recovered.

Accounts Receivable

Funds owed to a business by its customers for goods or services delivered or used but not yet paid for.

Service Charge Expense

Costs incurred by a company for the services provided by another entity, often including bank fees or utilities.