Natchez, Inc

question 56

Multiple Choice

Natchez, Inc.is considering the purchase of a new machine costing $200,000.The company will incur $5,000 per year in cash operating expenses but it will allow the company to earn an additional $100,000 per year in revenues.Natchez expects the machine to provide future benefits for 3 years and salvage value at the end of the 3-year period to be $10,000.The company uses straight-line depreciation method.The income tax rate is 30%.If the required rate of return is 10%, how much is the net present value of this project?

• A)$20,143
• B)$12,629
• C)$43,769
• D)None of these answer choices are correct.

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Definitions:

Significance Level

In statistics, a threshold for determining how significant the results of an experiment are, often used in hypothesis testing to gauge the probability of incorrectly rejecting a true null hypothesis.

Sample Weigh-Ins

A methodology or procedure in research and statistics where initial measurements or data collection are carried out to understand a sample’s characteristics before the main analysis.

Confidence Interval

A spectrum of figures, taken from sample observations, possibly enclosing the value of an undetermined population characteristic.

Margin Of Error

An expression of the amount of random sampling error in a survey's results, indicating the confidence in the reliability of the results.