Tech Engineering Company Is Considering the Purchase of a New

question 149

Multiple Choice

Tech Engineering Company is considering the purchase of a new machine to replace an existing one.The old machine was purchased 5 years ago at a cost of $20,000,and it is being depreciated on a straight line basis to a zero salvage value over a 10-year life.The current market value of the old machine is $14,000.The new machine,which falls into the MACRS 5-year class,has an estimated life of 5 years,it costs $30,000,and Tech plans to sell the machine at the end of the 5th year for $1,000.The new machine is expected to generate before-tax cash savings of $3,000 per year.The company's tax rate is 40 percent.What is the IRR of the proposed project?

• A) 4.1%
• B) 2.2%
• C) 0.0%
• D) −1.5%
• E) −3.3%

Understand the concepts of coupon rate, duration, and their impact on bond investment decisions.

Determine the inflation rate given nominal and real rates of return.

Calculate the duration of bonds and understand its implication on interest rate risk.

Understand the concept of interest rate risk and identify which bonds are more susceptible to it.

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Definitions:

Monozygotic Twins

Identical twins that originate from a single fertilized egg, sharing the same genetic material.

Fertilization Process

The union of a male sperm cell and a female ovum (egg) to form a zygote, marking the beginning of pregnancy.

Age of Viability

The stage of fetal development at which the fetus is considered capable of surviving outside the womb with medical assistance, typically around 24 weeks of gestation.

Science and Medicine

Fields dedicated to the study and application of knowledge to discover natural laws and improve human health and well-being.