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Discount Dollar Store Is Considering the Purchase of a New

question 88

Multiple Choice

Discount Dollar Store is considering the purchase of a new machine costing $220,000.This machine is estimated to generate an additional $88,000 per year in revenues.The machine will be depreciated using the straight-line method over its 4-year life.There is no expected salvage value at the end of its life.Expected annual net cash flows are $67,240 and expected annual net income from the new machine total $12,240.The required rate of return is 8% and the income tax rate is 28%.How much is the net present value of this project?

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Definitions:

Supercenter

A large retail store that combines a supermarket and a department store, offering a wide variety of goods including groceries and general merchandise.

Full-Size Grocery Store

A large retail store offering a wide variety of food and household products, typically including fresh produce, meat, bakery, and dairy sections.

Scrambled Merchandising

A retail strategy where a store sells products beyond its traditional inventory or market, often to increase foot traffic or capitalize on cross-selling opportunities.

Unrelated Product Lines

A range of products that are marketed by a company that bear no significant relation to each other in terms of production, market, technology, or branding.