The Carnation Chemical Company Is Investing in an Incinerator to Dispose

question 18

Multiple Choice

The Carnation Chemical Company is investing in an incinerator to dispose of PCB waste. The incinerator costs $1.5 million and will generate end of year cash of $1 million for the next 3 years. At the end of 3 years the incinerator will be worthless and must be disposed of at the cost of $500,000. The internal rate of return for this project is:

• A) between 10% and 20%.
• B) between 20% and 30%.
• C) between 30% and 40%.
• D) more than 40%.

Understand the main sources of household income.

Describe the impact of economic conditions on transfer payments.

Identify the primary components of personal income in the United States.

Understand the structure and significance of transfer programs at the federal level.

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Definitions:

Transaction Motive

Refers to the need to hold cash for the purpose of conducting daily business transactions and operations.

Lockbox System

A service provided by banks to process payments by collecting and depositing checks into the company's account quickly.

NPV

Net Present Value (NPV) is a method used in capital budgeting to determine the value of an investment by calculating the present value of expected future cash flows using a specific discount rate.

Cash Concentration Accounts

Bank accounts used by companies to concentrate cash from multiple accounts into one for efficient management and utilization.