Goldsmith Labs Recover Gold from Printed Circuit Boards

question 46

Multiple Choice

Goldsmith labs recover gold from printed circuit boards. It has developed new equipment for the purpose. The following data is given.
(1) ) Equipment costs $250,000
(2) ) It will cost $200,000 per year to run
(3) ) It has an economic life of 5 years and is depreciated using straight-line method
(4) ) It will recover 300 ounces of gold per year
(5) ) The current price of gold is $600 per ounce and it expected to increase at a rate 4% per year for the foreseeable future
(6) ) The tax rate is 30%
(7) ) The cost of capital is 8% What is NPV of the equipment?

• A) $430,400
• B) $520,510
• C) $470,400
• D) None of the above

---

Definitions:

Prevention Cost

Expenses incurred to avoid defects in products or services, including costs associated with quality planning, training, and process control.

Finished Products

Goods that have completed the manufacturing process and are ready for sale to customers.

Cell Conversion Cost

The costs, both direct and indirect, associated with converting raw materials into finished goods within a manufacturing cell.

Lean Cell

A workstation or area in manufacturing designed according to lean principles, focusing on minimizing waste and maximizing efficiency.