Replace the Old Machine with a New Machine If

question 41

Multiple Choice

Replace the old machine with a new machine if:

• A)the net cash inflows of the old machine are greater than the net cash inflows of the new machine.
• B)the net cash inflows of the new machine are greater than the net cash inflows of the old machine.
• C)the NPV of replacement is negative.
• D)none of the above.

---

Definitions:

Net Profit

The amount of profit left over after all expenses and taxes have been subtracted from total revenue.

Pretax Profit

The earnings a company generates before taxes are deducted.

Common Stock

A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's profits or losses.

Dividend Payments

Cash payments made by a company to its shareholders, usually derived from the company's profits.