Reference: 10-07
UR Company Is Considering Rebuilding and Selling Used

question 74

Multiple Choice

Reference: 10-07
UR Company is considering rebuilding and selling used alternators for automobiles. The company estimates that the net operating cash flows (sales less cash operating expenses) arising from the rebuilding and sale of the used alternators would be as follows (numbers in parentheses indicate an outflow) : $$\begin{array} { | l | l | } \hline \text { Years } 1 - 10 & \$ 90,000 \\\hline \text { Year } 11 & \$ ( 20,000 ) \\\hline \text { Year } 12 & \$ 100,000 \\\hline\end{array}$$ In addition to the above net operating cash flows, UR Company would purchase production equipment costing
$200,000 now to use in the rebuilding of the alternators. The equipment would have a 12-year life and a $15,000 salvage value. The company's discount rate is 10%.
-The present value of the net operating cash flows (sales less cash operating expenses) arising from the rebuilding and sale of the alternators (rounded to the nearest dollar) is:

• A)$577,950.
• B)$596,735.
• C)$582,735.
• D)$591,950.

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Definitions:

Decision-Making

The process through which choices are made from among several alternatives, considering the outcomes and consequences of each option.

Worldview

A comprehensive perspective through which a person or group understands and interprets the world and their place in it, encompassing beliefs, values, and attitudes.

Interests

Preferences, desires, or areas of focus that individuals or groups prioritize or find important.

Organizational Control

The process through which a company controls and directs its resources to achieve its goals, involving procedures, standards, and policies for regulating performance.