A Company Buys a Machine for $400,000

question 23

Multiple Choice

A company buys a machine for $400,000. During the next 8 years, the machine depreciates at the rate of 25% per year. That is, at the end of each year, the depreciated value is 75% of what it was at the beginning of the year. Find the depreciated value of the machine at the end of the 8 full years. Round answer to the nearest cent.

• A)24.41
• B)30,033.87
• C)6.10
• D)53,393.55
• E)40,045.17

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Definitions:

Forward Rates

Future interest rates derived from current term structure of interest rates or from the interest rate swap market, predicting future financial market conditions.

Short-Run Exposure

Refers to the degree to which a company's financial performance is affected by fluctuations in foreign exchange rates over a short period.

Home Currency Approach

A method of currency risk management that converts all foreign currencies and related activity into the domestic currency of the company for analysis and reporting.