Whitton Corporation Uses a Discount Rate of 16

question 404

Multiple Choice

Whitton Corporation uses a discount rate of 16%. The company has an opportunity to buy a machine now for $18,000 that will yield cash inflows of $10,000 per year for each of the next three years. The machine would have no salvage value. The net present value of this machine is closest to (Ignore income taxes.) :Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.

• A) $22,460
• B) $4,460
• C) $(9,980)
• D) $12,000

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Definitions:

Environmental Standards

Regulations and criteria set by authorities concerning pollutants and emissions to preserve environmental quality.

Marginal Benefit

The additional satisfaction or value a consumer receives from consuming one more unit of a good or service.

Pollution

The introduction of contaminants into the natural environment, causing adverse change and harm to habitats and organisms.

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