Carlin Company, Which Uses Net Present Value to Analyze Investments

question 21

Multiple Choice

Carlin Company, which uses net present value to analyze investments, requires a 10% minimum rate of return. A staff assistant recently calculated a $500,000 machine's net present value to be $86,400, excluding the impact of straight-line depreciation.

If Carlin ignores income taxes and the machine is expected to have a five-year service life, the correct net present value of the machine would be:

• A) $(13,600).
• B) $86,400.
• C) $186,400.
• D) $292,700.
• E) $465,500.

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Definitions:

Bank Service Charge

A bank service charge is a fee imposed by a bank on its customers for the provision of banking services such as account maintenance, transactions, and overdrafts.

Petty Cash Fund

A little sum of money reserved for immediate outlays on diverse small expenditures.

Journalize

To journalize is to record financial transactions in the chronological order in a company's accounting system.

Replenishment

Replenishment encompasses the process of stocking up or refilling inventory or supplies to ensure a continuous flow of goods or materials.