Stanton Inc

question 91

Multiple Choice

Stanton Inc.is considering the purchase of a new machine which will reduce manufacturing costs by $5,000 annually and increase earnings before depreciation and taxes by $6,000 annually.Stanton will use the MACRS method to depreciate the machine,and it expects to sell the machine at the end of its 5-year operating life for $10,000 before taxes.Stanton's marginal tax rate is 40 percent,and it uses a 9 percent required rate of return to evaluate projects of this type.If the machine's cost is $40,000,what is the project's NPV?

• A) $1,014
• B) $2,292
• C) $7,550
• D) $817
• E) $5,040

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Definitions:

Deforestation

The large-scale removal of trees from forests or woodlands, often resulting in loss of biodiversity and environmental disruption.

Habitat

The natural environment in which an organism lives, grows, and thrives, including all living and non-living factors.

Biodiversity

The variety and variability of life on Earth, including diversity within species, between species, and of ecosystems.

Extinct Species

Species that no longer exist, having no living members left due to factors like habitat destruction, predation, or climate change.