Paragas, Incorporated, Is Considering the Purchase of a Machine That

question 294

Multiple Choice

Paragas, Incorporated, is considering the purchase of a machine that would cost $370,000 and would last for 8 years. At the end of 8 years, the machine would have a salvage value of $52,000. The machine would reduce labor and other costs by $96,000 per year. Additional working capital of $4,000 would be needed immediately. All of this working capital would be recovered at the end of the life of the machine. The company requires a minimum pretax return of 19% on all investment projects. (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.The net present value of the proposed project is closest to:

• A) $9,584
• B) $78,530
• C) $22,532
• D) $19,528

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Definitions:

Selective Perception

The process by which individuals selectively interpret what they see or hear on the basis of their interests, background, experience, and attitudes.

Response Characteristic

The specific manner in which an individual responds to stimuli or events, often influenced by personal traits or psychological states.

Unifying Trait

A characteristic or attribute that is considered central to the identity or behavior of an individual, bringing coherence to various aspects of themselves.

Attribution Theory

A concept in psychology that explains how individuals infer the causes of their own and others' behavior.