TexMex Is Considering Replacing Its Tortilla Machine with a New

question 48

Multiple Choice

TexMex is considering replacing its tortilla machine with a new model that sells for $46,000 including the cost of installation. The old machine has been fully depreciated and has a $0 salvage value. The new machine will be depreciated as a 3-year MACRS asset. Revenues are expected to increase $18,000 per year over the 5-year life of the new machine. At the end of 5 years the new machine is expected to have no salvage value. What is the IRR for this project if TexMex has a required rate of return of 14% and a marginal tax rate of 40%? Operating costs are not expected to increase from the current level of $8,000 per year.

• A) 21.0%
• B) 14.0%
• C) 19.3%
• D) 5.7%

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Definitions:

Stimulus For Breathing

Factors that trigger the respiratory center in the brain, causing inhalation and exhalation, such as increased carbon dioxide levels in the blood.

Respiratory Distress Syndrome

A medical condition often seen in premature infants, characterized by difficulty breathing due to underdeveloped lungs.

Gestation

The period of development that occurs from conception to birth in mammals, including humans, typically lasting around 40 weeks in humans.

Bilateral Rhonchi

Coarse, rattling respiratory sounds often associated with mucus accumulation in the airways, heard on both sides of the chest.