Johnson Jets Is Considering Two Mutually Exclusive Machines

question 38

Multiple Choice

Johnson Jets is considering two mutually exclusive machines. Machine A has an up-front cost of $100,000 (CF0 = -100,000) Machine B has an up-front cost of $50,000(CF0 = -50,000) The company's cost of capital is 10.5 percent. What is the net present value (on a six-year extended basis) of the most profitable machine?

• A) $23,950
• B) $41,656
• C) $56,238
• D) $62,456
• E) $71,687

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Definitions:

Mesopotamia

An ancient region located in the eastern Mediterranean, bounded by the Tigris and Euphrates rivers, known as the cradle of civilization for its early developments in writing, law, and urbanization.

Patents

Legal documents granting an inventor exclusive rights to produce, use, and sell their invention for a certain period of time.

Technology

The application of scientific knowledge for practical purposes, especially in industry and in the creation of devices or processes that improve efficiency or quality of life.

Growth

A process whereby an economy's capacity to produce goods and services increases over time.