Pique Corporation Wants to Purchase a New Machine for $300,000

question 52

Multiple Choice

Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments.

What is the net present value (NPV) of the investment, rounded to the nearest whole dollar? (The PV annuity factor for 5 years, 10% is 3.791.) Assume that the cash inflows occur at year-end.

• A) ($270,480).
• B) $63,936.
• C) $109,428.
• D) $154,920.
• E) None of these.

---

Definitions:

Super

In object-oriented programming, a keyword used to refer to an object's parent class, often used to invoke the superclass's methods or constructors.

Constructor

A special method in a class that is called when an instance of the class is created, often used to initialize objects.

Derived Class

This is another term for derived classes, implying a class that inherits properties and behavior from a base class.

Instanceof Operator

An operator used in programming to test if an object is an instance of a specific class or interface, returning true or false.