Walker & Campsey Wants to Invest in a New Computer

question 82

Multiple Choice

Walker & Campsey wants to invest in a new computer system, and management has narrowed the choice to Systems A and B. System A requires an up-front cost of $100,000, after which it generates positive after-tax cash flows of $60,000 at the end of each of the next two years. System B also requires an up-front cost of
$100,000, after which it generates positive after-tax cash flows of $48,000 at the end of each of the next three years. The company's cost of capital is 11%. Based on the equivalent annual annuity, which system will be chosen?

• A) A,$1,622.88
• B) B,$1,622.88
• C) A,$7,083.47
• D) B,$7,083.47

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Definitions:

Exposure Therapy

A psychological treatment that helps individuals confront their fears by gradual and repeated exposure to the feared object or context.

Facilitated Communication

A controversial technique where a facilitator helps a person with severe communication disabilities by supporting their hand or arm while they attempt to type or communicate through another device.

Light Exposure Therapy

A treatment method for seasonal affective disorder (SAD) and certain other conditions by exposure to artificial light.

Brain Region

A brain region is a distinct area of the brain identified by its structure, function, or both, which contributes to specific neurological or psychological functions.