Kaneb Is Evaluating Two Alternative Pipeline Welders

question 15

Multiple Choice

Kaneb is evaluating two alternative pipeline welders.Welder A costs $310,000, has a 7 year life, and is expected to generate net cash inflows of $78,000 in each of the 7 years.Welder B costs $320,000, has a 5 year life, and is expected to generate annual net cash inflows of $68,900 in each of the 5 years.Kaneb's cost of capital is 16%.Using the equivalent annual annuity method, which alternative should be chosen and what is its NPV?

• A)B, $4,920
• B)A, $7,111
• C)B, $10,650
• D)A, $7,800

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Definitions:

Psychosocial Development

Erikson's theory that individuals pass through eight developmental stages, each characterized by a different psychological crisis.

Initiative Versus Guilt

Initiative versus guilt is a stage in Erik Erikson's theory of psychosocial development, where children aged 3 to 5 years learn to initiate activities and interact with others or experience guilt for their actions and thoughts.

Erikson

A reference to Erik Erikson, a developmental psychologist known for his theory on the psychological stages of human development.

Piagetian Process

Refers to the cognitive processes and mechanisms proposed by Jean Piaget, such as assimilation, accommodation, and equilibration, that explain how knowledge develops in children.