Reference: 10-12 Hanley Company Purchased a Machine for $125,000 That Will Be

question 91

Multiple Choice

Reference: 10-12
Hanley Company purchased a machine for $125,000 that will be depreciated on the straight-line basis over a five-year period with no salvage value. The related cash flow from operations is expected to be $45,000 a year. These cash flows from operations occur uniformly throughout the year.
-The Whitton Company uses a discount rate of 16%. buy a machine now for $18,000 that will yield cash inflows of $10,000 per year for each of the next three years. The machine would have no salvage value. The net present value of this machine to the nearest whole dollar is:

• A)$4,460.
• B)$22,460.
• C)($9,980).
• D)$12,000.

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Definitions:

Sales

The revenue a company earns from selling goods or services over a period.

Unusual Item

A gain or loss in financial statements that is infrequent or uncommon in occurrence.

Corporate Income Tax

Taxes imposed on the income or profit of corporations and other business entities by government authorities.

Outlet Stores

Retail stores that sell products directly from manufacturers at reduced prices, often overstock or discontinued lines.