Tech Engineering Company Is Considering the Purchase of a New

question 67

Multiple Choice

Tech Engineering Company is considering the purchase of a new machine to replace an existing one.The old machine was purchased 5 years ago at a cost of R20,000, and it is being depreciated on a straight line basis to a zero salvage value over a 10-year life.The current market value of the old machine is R14,000.The new machine, which falls into the MACRS 5-year class, has an estimated life of 5 years, it costs R30,000, and Tech plans to sell the machine at the end of the 5th year for R1,000.The new machine is expected to generate before-tax cash savings of R3,000 per year.The company's tax rate is 40 percent.What is the IRR of the proposed project?

• A) 4.1%
• B) 2.2%
• C) 0.0%
• D) -1.5%
• E) -3.3%

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Definitions:

Injunction

A court order requiring an individual or entity to do or cease doing a specific action.

Precedent

A legal principle or rule established in a previous legal case that is either binding or persuasive for a court when deciding subsequent cases with similar issues or facts.

Monetary

Relating to money, currency, or the financial system of managing money within an economy.

Appellate Division

The Appellate Division is a part of the court system responsible for reviewing and revising the decisions made by lower courts, ensuring justice and adherence to the law.