Allen Co Invested in a Machine That Has a 3-Year Useful

question 62

Multiple Choice

Allen Co. invested in a machine that has a 3-year useful life. The company's discount rate is 12%, and the net present value of the investment is $(573) . Annual cost savings are: year 1 $3,000; year 2 $4,000; and year 3 $5,000. Determine the original cost of the machine. Ignore income taxes.

• A) $12,000
• B) $8,500
• C) $10,000
• D) $9,500

---

Definitions:

Static Budget

A budget that does not change or adjust with variations in sales volume or business activity.

Original Planned

Pertains to the initial strategy or set of actions that were designed to achieve a specific outcome or goal.

Activity Level

A measure of the volume of production or operations, often influencing costs and profitability in businesses.

Management by Exception

A management strategy where only significant deviations from set plans, standards, or objectives are brought to the attention of management.