Mars IncIs Considering the Purchase of a New Machine Which Will

question 150

Multiple Choice

Mars Inc.is considering the purchase of a new machine which will reduce manufacturing costs by $5,000 annually.Mars will use the MACRS accelerated method to depreciate the machine,and it expects to sell the machine at the end of its 5-year operating life for $10,000.The firm expects to be able to reduce net working capital by $15,000 when the machine is installed,but required working capital will return to the original level when the machine is sold after 5 years.Mars' marginal tax rate is 40 percent,and it uses a 12 percent required rate of return to evaluate projects of this nature.If the machine costs $60,000,what is the NPV of the project?

• A) −$15,394
• B) −$14,093
• C) −$58,512
• D) −$21,493
• E) −$46,901

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Definitions:

Added Value Negotiating

A negotiation technique where both parties work together to find solutions that enhance the value of the deal for everyone.

Openness

A trait or quality that involves being receptive to new ideas, experiences, and diverse perspectives, often considered crucial in creative and collaborative environments.

Commitment

A state or quality of being dedicated to a cause, activity, or goal, often demonstrated by persistent effort and determination.

Subsystem Adjustments

Modifications or changes made within a smaller part of an organization's system affecting its functioning or structure.