Brandon Company Is Contemplating the Purchase of a New Piece

question 114

Multiple Choice

Brandon Company is contemplating the purchase of a new piece of equipment for $45,000. Brandon is in the 30% income tax bracket. Predicted annual after-tax cash inflows from this investment are $18,000, $15,000, $9,000, $6,000 and $3,000 for years 1 through 5, respectively. The firm uses straight-line depreciation with no residual value at the end of five years.

Assume that the hurdle rate for accepting new capital investment projects for the company is 4%, after-tax. (Note: PV $1 factors for 4% are as follows: for year 1 = 0.962, for year 2 = 0.925, for year 3 = 0.889, for year 4 = 0.855, for year 5 = 0.822; the PV annuity factor for 4%, 5 years = 4.452.) At an after-tax discount rate of 4%, the estimated net present value (NPV) of the proposed investment is (rounded to the nearest hundred dollars) :

• A) ($15,000).
• B) ($12,300).
• C) ($9,300).
• D) ($6,000).
• E) $1,800.

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Definitions:

Emotion Work

The process of managing one's own feelings and expressions to fulfill the emotional requirements of a job or role.

Socially Appropriate

Behaviors or actions that are accepted and expected by society or a specific social group.

Socially Inappropriate

Behavior or language that is not acceptable or considered offensive by societal norms and expectations.

Erving Goffman's Dramaturgy

A sociological perspective introduced by Erving Goffman that views social interactions as theatrical performances, where individuals present themselves in ways that will be accepted by others.