$$\text { Reference: } 10 - 03$$ Apex Corp Is Planning to Buy Production Machinery Costing $100,000

question 60

Multiple Choice

$$\text { Reference: } 10 - 03$$ Apex Corp. is planning to buy production machinery costing $100,000. This machinery's expected useful life is five years, with no residual value. Apex uses a discount rate of 10% and has calculated the following data pertaining to the purchase and operation of this machinery: $$\begin{array} { | c | c | } \hline \text { Year } & { \begin{array} { c } \text { Estimated } \\\text { annual net } \\\text { cash inflow }\end{array} } \\\hline 1 & \$ 60,000 \\\hline 2 & 30,000 \\\hline 3 & 20,000 \\\hline 4 & 20,000 \\\hline 5 & 20,000 \\\hline\end{array}$$
-Some investment projects require that a company expand its working capital at the initiation of a project to service the greater volume of business that will be generated. Assuming a project in which the increased working capital will no longer be required after the end of the project, under the net present value method, these changes in working capital should be treated as:

• A)a future cash inflow for which discounting is necessary.
• B)irrelevant to the net present value analysis.
• C)both an initial cash outflow for which no discounting is necessary and a future cash inflow for which discounting is necessary.
• D)an initial cash outflow for which no discounting is necessary.

---

Definitions:

Personality Attributes

Characteristics or qualities that form an individual's distinct personality traits.

Work Outcomes

The results or consequences of an individual's performance in a work environment, including productivity, job satisfaction, and career advancement.

Interjudge Agreement

The degree to which two or more people making judgments about the same person provide the same description of that person’s personality.

Behavioral Prediction

The degree to which a judgment or measurement can predict the behavior of the person in question.