Suppose a Firm Is Considering the Purchase of a Machine

question 213

Multiple Choice

Suppose a firm is considering the purchase of a machine which would increase its total revenues by $10,000 for the year. The machine costs $8,000 and has a useful life of one year. The interest rate is 20 percent. This investment should

• A)be undertaken because the rate of return is 2 percent greater than the interest rate.
• B)be undertaken because the rate of return is 5 percent greater than the interest rate.
• C)be undertaken because the rate of return is 7 percent greater than the interest rate.
• D)not be undertaken, because the rate of return is 7 percent less than the interest rate.

Understand the concept of criminal fraud and the elements required to establish it in court.

Distinguish between the types of pleas available to defendants in criminal court and their implications.

Explain the concept of the insanity defense including the tests applied to determine its applicability.

Understand the specific requirements under the Sarbanes-Oxley Act for maintaining audit records and the legal consequences of non-compliance.

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Definitions:

Annual Cash Inflows

The total amount of money received by a business from its operations, investments, and financing activities over the course of a year.

Curb-Forming Machine

A specialized construction equipment used for shaping concrete curbs, gutters, and sidewalks by guiding prepared concrete into the desired shapes.

Net Cash Inflows

The total amount of cash received minus the total amount of cash spent over a specific period of time.

Investment Project

A project involving the allocation of capital resources with the expectation of generating future returns or benefits.