Woods Manufacturing Is Considering the Purchase of a New Sewing

question 137

Multiple Choice

Woods Manufacturing is considering the purchase of a new sewing machine that costs $18,000.The machine, because of its efficiency, will save about $4,000 in cost each year.The machine is expected to have a salvage value of $3,000 and a life of 6 years.Woods' required rate of return is 12%.Using the interest tables, what is the machine's net present value?

• A)($34)
• B)$1,520
• C)$15,000
• D)$24,000

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Definitions:

Ownership

The state or fact of exclusive rights and control over property, which can be an object, land/real estate, or intellectual property.

Dividend Growth Model

A method for valuing a stock by using predicted dividends and discounting them back to present value.