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:

Inductive Reactance

The opposition to the change of current flow due to inductance in an AC circuit, measured in Ohms.

Apparent Power

The total power in an AC circuit, both used and unused, measured in Volt-Amperes (VA) and combining both active and reactive power components.

Parallel Circuit

A circuit in which components are connected across common points or junctions, providing multiple paths for current.

Inductive Reactance

The opposition to the change in current flow in an AC circuit, caused by the inductance of the circuit elements.