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Colortex, Incorporated Is Considering the Purchase of a New Machine

question 43

Multiple Choice

Colortex, Incorporated is considering the purchase of a new machine. The machine will cost $105,000. The firm currently generates an annual cash flow of $150,000 a year. It is expected
That the machine will increase annual cash flows to $170,000. The machine is expected to last 7
Years after which both its book value and market value will be zero. What is the NPV of the
New machine if Colortex requires a 14% return on this project?

Explain the nature of accumulated depreciation and its role in accounting for the allocation of the cost of tangible assets over their useful lives.

Understand how to record supplies and recognize the expense upon their use.

Distinguish between prepaid and accrued expenses.

Recognize and adjust entries for advanced payments and understand the concept of unearned revenue.

Definitions:

Self-Interest

The action of working towards one's personal advantage, often considered a driving force behind economic decisions.

Equitable Distribution

A legal principle used in family law to fairly divide property and assets between partners during a divorce.

Functions of Prices

The role prices play in indicating the scarcity of goods and allocating resources in an economy.

Market System

An economic system whereby decisions regarding investment, production, and distribution are based on supply and demand, and prices of goods and services are determined in a free price system.