Mars IncIs Considering the Purchase of a New Machine Which Will

question 25

Multiple Choice

Mars Inc.is considering the purchase of a new machine which will reduce manufacturing costs by R5,000 annually.Mars will use the MACRS accelerated method to depreciate the machine, and it expects to sell the machine at the end of its 5-year operating life for R10,000.The firm expects to be able to reduce net working capital by R15,000 when the machine is installed, but required working capital will return to the original level when the machine is sold after 5 years.Mars' marginal tax rate is 40 percent, and it uses a 12 percent required rate of return to evaluate projects of this nature.If the machine costs R60,000, what is the NPV of the project?

• A) -R15,394
• B) -R14,093
• C) -R58,512
• D) -R21,493
• E) -R46,901

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Definitions:

Kahneman's Capacity Model

A cognitive theory proposed by Daniel Kahneman that outlines the limited capacity of the human brain to engage in multiple tasks, emphasizing the allocation of cognitive resources between competing demands.

Mental Resources

Cognitive capacities or energy dedicated to processing information, reasoning, and memory, crucial for performing mental tasks and decision-making.

Filter Theory

A theory of attention proposing that information that exceeds the capacity of a processor to process at any given time is blocked from further processing.

Unattended Information

Information that is present in the environment but is not the focus of one's attention or conscious awareness.