A Company Bought and Installed an Assembly Line for $5

question 20

Multiple Choice

A company bought and installed an assembly line for $5 million and $0.5 million respectively. The company plans to use this assembly line for 8 years and then sell it for $100 000. Calculate the equivalent annual capital costs of the assembly line if the capital recovery factor is 0.1874, and MARR is 10% for the capital investment.

• A)$0.997 million
• B)$1.012 million
• C)$1.022 million
• D)$1.027 million
• E)$1.046 million

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Definitions:

Diversified Portfolio

An investment strategy that spreads investments across various asset classes in order to reduce risk.

Company-specific

Refers to information, events, or characteristics that only affect a single company, not the industry as a whole or the market at large.

Unsystematic Events

Specific, unpredictable events that affect a single company or a small group of companies, not the entire market.

Investment Risk

The potential for loss of value in an investment, often measured by the variability of returns associated with a given asset.