Turntec Is Considering Replacing an Automatic Shuttle Machine That Has

question 67

Multiple Choice

Turntec is considering replacing an automatic shuttle machine that has a book value of $2,000 and a $0 market value with a more efficient machine that will cost $24,000. The annual net cash flows from the new equipment are expected to be $6,000 for the next 6 years. What is the net present value of this project? Assume the firm's cost of capital is 12% and its marginal tax rate is 40%.

• A) $666
• B) $1,466
• C) $1,866
• D) -$134

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Definitions:

Psychological Contract

An unwritten agreement that sets out mutual expectations and obligations between employers and employees beyond the formal contract of employment.

Employment Relationship

The formal and informal relationship between an employer and an employee, defined by rights, responsibilities, and obligations.

Psychological Contract

An implicit agreement between an employee and employer that outlines the informal obligations and expectations of their professional relationship.

Exchange Of Values

The process where parties engage in transactions or interactions, each offering something of value to the other, aiming for mutual benefit.