Zinc Corp Is Planning to Purchase a New Machine

question 20

Multiple Choice

Zinc Corp. is planning to purchase a new machine. The initial investment outlay is expected to be $40,000, and the annual supplemental operating cash flows that the machine is expected to generate during its three-year life are $11,000, $15,000, and $18,000, respectively. The company's required rate of return is 9 percent. Which of the following statements is correct about the machine's net present value (NPV) and the decision of Zinc Corp. should make?

• A)Accept the project because NPV = $4,000
• B)Reject the project because NPV = -$3,384
• C)Accept the project because NPV = -$4,382
• D)Reject the project because NPV = $16,981
• E)Accept the project because NPV = $76,616

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Definitions:

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