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

question 96

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 project's NPV?

• A) $2,622
• B) $2,803
• C) $2,917
• D) $5,712
• E) $6,438

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Definitions:

Factor

An element that contributes to a particular result or situation, often used as a variable in experiments and statistical analysis.

Levels

Distinct and gradated stages within a hierarchy or process.

Factor

A variable that is manipulated in an experiment to determine its effect on the dependent variable, or a value that influences results in various contexts.

Factorial ANOVA

A statistical test used to determine the effect of two or more independent variables at multiple levels on a dependent variable.