Dexter Company Is Considering Purchasing Equipment $$\begin{array} { l l } \text { Year 1 } & \$ 120,000 \\\text { Year 2 } & \$ 200,000\end{array}$$

question 30

Multiple Choice

Dexter Company is considering purchasing equipment.The equipment will produce the following cash flows: $$\begin{array} { l l } \text { Year 1 } & \$ 120,000 \\\text { Year 2 } & \$ 200,000\end{array}$$ Dexter requires a minimum rate of return of 10%.What is the maximum price Dexter should pay for this equipment?

• A)$274,381
• B)$165,290
• C)$320,000
• D)$160,000

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Definitions:

Equilibrium

A situation in a market where demand equals supply, and there is no tendency for the quantities supplied and demanded to change.

Market

The institution through which buyers and sellers interact and engage in exchange.

S And D

Stands for Supply and Demand, which are the forces that determine the price of goods and services in a marketplace.

CD-Rom Drives

Hardware devices used for reading data stored on CD-ROMs, typically used for distributing software and storing media in the past.