Miles, Inc A) $23,958 Per Year

question 26

Multiple Choice

Miles, Inc. is considering the purchase of a new machine for $600,000 that has an estimated useful life of 5 years and no salvage value. The machine will generate net annual cash flows of $105,000. It is believed that the new machine will reduce downtime because of its reliability. Assume the discount rate is 8%. In order to make the project acceptable, the reduction in downtime must be worth $\begin{array}{lrr}& \text { Present Value } & \text { PV of an Annuity } \\\text { Year } & \text { of } 1 \text { at } 8 \% & \text { of } 1 \text { at } 8 \% \\1 & .926 & .926 \\2 & .857 & 1.783 \\3 & .794 & 2.577 \\4 & .735 & 3.312 \\5 & .681 & 3.993\end{array}$

• A) $23,958 per year.
• B) $49,662 per year.
• C) $18,264 per year.
• D) $36,147 per year.

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Definitions:

Positive Correlation

When one variable is high, the other variable tends to be high as well.

Socially Desirable

Behaviors or traits that are valued and approved of by a social group or society.

Self-Report Measure

A type of psychological test or questionnaire where individuals provide responses about themselves, often concerning behaviors, thoughts, or feelings.

Small Positive Correlation

A statistical relationship indicating a slight increase in one variable is associated with a slight increase in another variable.