Your Company Is Considering a Machine That Will Cost $1,000

question 20

Multiple Choice

Your company is considering a machine that will cost $1,000 at Time 0 and which can be sold after 3 years for $100.To operate the machine,$200 must be invested at Time 0 in inventories;these funds will be recovered when the machine is retired at the end of Year 3.The machine will produce sales revenues of $900/year for 3 years;variable operating costs (excluding depreciation) will be 50 percent of sales.Operating cash inflows will begin 1 year from today (at Time 1) .The machine will have depreciation expenses of $500,$300,and $200 in Years 1,2,and 3,respectively.The company has a 40 percent tax rate,enough taxable income from other assets to enable it to get a tax refund from this project if the project's income is negative,and a 10 percent required rate of return.Inflation is zero.What is the project's NPV?

• A) $6.24
• B) $7.89
• C) $8.87
• D) $9.15
• E) $10.41

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Definitions:

Regulating Appetite

Regulating Appetite involves physiological and psychological mechanisms that control food intake, influenced by factors such as hormonal signals, presence of food, and learned behaviors.

Predominantly Homosexual

Refers to individuals whose sexual and emotional attraction is primarily towards people of the same sex.

Men

Adult human males.

Sexual Intercourse

A physical act between individuals that involves genital contact and can lead to reproduction and the expression of intimacy.