Thomson Media Is Considering Some New Equipment Whose Data Are

question 69

Multiple Choice

Thomson Media is considering some new equipment whose data are shown below. The equipment has a 3-year tax life and would be fully depreciated by the straight-line method over 3 years, but it would have a positive pre-tax salvage value at the end of Year 3, when the project would be closed down. Also, some new working capital would be required, but it would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV?

• A) $20,762
• B) $21,854
• C) $23,005
• D) $24,155
• E) $25,363

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Definitions:

Two-Tailed Test

A statistical test that considers the possibility of an effect in two directions, both above and below the mean.

Significance Level

The significance level, often denoted by alpha, is the threshold at which the null hypothesis is rejected in a statistical test.

Wilcoxon Signed-Rank Test

A nonparametric test used to compare paired or matched samples to assess whether their population mean ranks differ.

Nonzero Difference

A term indicating that there is a measurable or meaningful difference between two entities or measurements.