Real Time Inc. the President of Real Time Inc. Has Asked You to Asked

question 123

Multiple Choice

Real Time Inc.
The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $40,000, and it falls into the MACRS 3-year class. Purchase of the computer would require an increase in net working capital of $2,000. The computer would increase the firm's before-tax revenues by $20,000 per year but would also increase operating costs by $5,000 per year. The computer is expected to be used for 3 years and then be sold for $25,000. The firm's marginal tax rate is 40 percent, and the project's required rate of return is 14 percent.
-Refer to Real Time Inc.What is the terminal cash flow ?

• A) $18,120
• B) $19,000
• C) $21,000
• D) $25,000
• E) $27,000

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Definitions:

Plateau

A plateau is a flat or level portion of a graph, or similarly, an area of land that is relatively flat and elevated above the surrounding terrain.

Heat of Vaporization

The amount of energy required to turn a liquid into a gas at its boiling point.

Heat of Fusion

The amount of energy required to change a substance from the solid phase to the liquid phase at its melting point without changing its temperature.

Phase Graph

A graphical representation showing the various phases (solid, liquid, gas) of a substance as a function of temperature and pressure.