Live Nutrition Is Considering the Purchase of a New Computer

question 37

Multiple Choice

Live Nutrition is considering the purchase of a new computer system for diagnosing health problems.The company estimates that the system will result in increased operating cash flows of $5,800 in year 1, $6,500 in year 2, and $11,400 in year 3.The company's required rate of return is 8%.What is the maximum cost the company will be willing to pay for the computer system?

• A)$14,947
• B)$23,700
• C)$19,992
• D)$43,692

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Definitions:

C Corporation

A legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity.

Laws of Inheritance

The principles that govern the passing of traits from one generation to the next through the transmission of genetic information.

Limited Partnership

A form of partnership where one or more partners have limited liabilities and limited involvement in the day-to-day management, while at least one partner has unlimited liability.

General Partners

Individuals or entities that manage a partnership and are personally responsible for its debts.