The Maritime Cannery Company Is Considering a New Machine That

question 19

Multiple Choice

The Maritime Cannery Company is considering a new machine that costs $100,000. It will last three years and management feels there are two possible cash flow possibilities each year, depending on whether the country is in recession or not. Year 1: 70% chance of $40,000 and 30% chance of $20,000; Year 2: 60% chance of $50,000 and 40% chance of $30,000; Year 3: 80% chance of $60,000 and 20% chance of $20,000. What is the expected net present value of the new machine if the company's discount rate is 6%?

• A) ($78,000)
• B) ($6,583)
• C) $6,000
• D) $13,116
• E) $28,000

---

Definitions:

Dorsiflexion

The action of raising the foot upwards towards the shin, decreasing the angle between the dorsum of the foot and the leg.

Retraction

The process of drawing back or being drawn back, both in a physical and metaphorical sense.

Epiphyseal Plate

A growth plate in long bones where new bone tissue forms, enabling growth in length.

Diaphysis

The central shaft of a long bone, distinct from the ends of the bone, which are called epiphyses.