You Are Considering Investing in a Piece of Equipment to Implement

question 276

Multiple Choice

You are considering investing in a piece of equipment to implement a cost-cutting proposal. The pre-tax cost reduction is expected to equal $41.67 for each of the three years of the project's life.The equipment has an initial cost of $125 and belongs in a 20% CCA class. Assume a 34% tax Bracket, a discount rate of 15%, and a salvage value of zero.If the equipment is sold to another company at the end of year 3 for $20, what is the NPV?

• A) -$33.56
• B) -$28.91
• C) $0
• D) $28.91
• E) $33.56

Describe the operating cycle for a merchandiser with credit sales.

Identify and explain the terms FOB shipping point and FOB destination and their impact on inventory accounting.

Understand and prepare closing entries for a merchandising company and how they differ from those of a service company.

Explain cost flows and operating activities in a merchandising company.

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Definitions:

Lithifies

The process by which sediments are compacted and cemented into solid rock, typically over geological time scales.

Sedimentary Rock

Rock formed by the accumulation and compaction of sediments, often containing fossils and layers that record Earth's history.

Loose Sediment

Unconsolidated particles of rock, soil, or minerals deposited by water, wind, or ice.

Sediment Production

The process of generating material, like sand, silt, and clay, that can be transported by water, wind, or ice, and deposited as sediment.