Vextra Corporation Is Considering the Purchase of New Equipment Costing

question 122

Multiple Choice

Vextra Corporation is considering the purchase of new equipment costing $35,000.The projected annual cash inflow is $11,000,to be received at the end of each year.The machine has a useful life of 4 years and no salvage value.Vextra requires a 12% return on its investments.The present value of an annuity of $1 for different periods follows: What is the net present value of the machine (rounded to the nearest whole dollar) ?

• A)$(33,410).
• B)$(3,100).
• C)$35,000.
• D)$3,410.
• E)$(1,590).

Calculate cost of goods sold, gross profit, and ending inventory under different cost flow methods.

Analyze the effects of inventory misstatements on financial statements.

Evaluate inventory using the lower of cost or market rule.

Apply cost flow assumptions in a perpetual inventory system.

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Definitions:

Underlying Asset

An asset on which a derivative instrument, such as an option or futures contract, is based, determining its value and performance.

April Option

A financial derivative contract that gives the holder the right, but not the obligation, to buy or sell an asset at a set price on or before a specific date in April.

American Put

An option contract giving the holder the right, but not the obligation, to sell a specified amount of an asset at a predetermined price before or on a specified expiration date.

European Call

An option contract that allows the holder to buy the underlying asset at a specific price only on the expiration date.