Stanton Inc

question 24

Multiple Choice

Stanton Inc. is considering the purchase of a new machine which will reduce manufacturing costs by $5,000 annually and increase earnings before depreciation and taxes by $6,000 annually. Stanton will use the MACRS method to depreciate the machine, and it expects to sell the machine at the end of its 5-year operating life for $10,000 before taxes. Stanton's marginal tax rate is 40 percent, and it uses a 9 percent cost of capital to evaluate projects of this type. If the machine's cost is $40,000, what is the project's NPV?

• A) $1,014
• B) $2,292
• C) $7,550
• D) $ 817
• E) $5,040

---

Definitions:

Insight Learning

A psychological phenomenon where a problem is suddenly understood or solved without the trial-and-error method, often seen as an "aha" moment.

Insight

Insight involves the ability to understand the inner nature of things or a clear, deep understanding of a complicated problem or situation.

Latent Learning

A form of learning that occurs without any obvious reinforcement or rewards, becoming apparent only when there is an incentive to demonstrate it.

Previous History

A record or background of past events or situations, especially as relevant to a particular subject or individual.