A New Asset Is Expected to Provide Service Over the Next

question 44

Multiple Choice

A new asset is expected to provide service over the next four years.It will cost $500,000,generates annual cash inflows of $150,000,and requires cash operating expenses of $30,000 each year.In addition,a $10,000 overhaul will be needed in year 3.If the company requires a 10% rate of return,the net present value of this machine would be:

• A)$(127,110),and the machine meets the company's rate-of-return requirement.
• B)$(127,110),and the machine does not meet the company's rate-of-return requirement.
• C)$(129,600),and the machine does not meet the company's rate-of-return requirement.
• D)$(151,700),and the machine meets the company's rate-of-return requirement.
• E)some other amount.

---

Definitions:

Gasoline Falls

Presumed to refer to a reduction in gasoline prices, though not a standard economic term.

Fuel-efficient Cars

Automobiles designed to use less fuel for the same distance traveled compared to standard vehicles, thus reducing operational costs and environmental impact.

Public Transportation

A system of vehicles such as buses and trains that operate at regular times on fixed routes and are used by the public.

In-state Students

Students enrolled in a public university or college within the same state in which they are residents, often eligible for lower tuition rates.