Forge Company Wants to Purchase a New Cutting Machine for Its

question 147

Multiple Choice

Forge Company wants to purchase a new cutting machine for its sewing plant. The investment is expected to generate annual cash inflows of $140,000. The required rate of return is 10% and the current machine is expected to last for seven years. Of the following choices, which is the dollar amount the company would be willing to spend for the machine, assuming its life is also seven years? Income taxes are not considered.

• A) $1,328,180
• B) $882,000
• C) $702,660
• D) $681,520

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Definitions:

Quantity Supplied

The total amount of a good or service that producers are willing and able to sell at a given price over a specified period.

Wool Coats

Garments made from the natural fibers of sheep, designed to provide warmth.

Harvest

The process of gathering mature crops from the fields, marking the culmination of a growing season and the initiation of the post-harvest phase.

Peanut Crop

The agricultural yield or production of peanuts in a given season or area.