Louie's Leisure Products Is Considering a Project Which Will Require

question 64

Multiple Choice

Louie's Leisure Products is considering a project which will require the purchase of $1.4 million in new equipment. The equipment will be depreciated straight-line to a zero book value over the 7-year life of the project. Louie's expects to sell the equipment at the end of the project for 20% of its original cost. Annual sales from this project are estimated at $1.2 million. Net working capital equal to 20% of sales will be required to support the project. All of the net working capital will be recouped at the end of the project. The firm desires a minimal 14% rate of return on this project. The tax rate is 34%.
-What is the amount of the after-tax salvage value of the equipment?

• A)$47,600
• B)$72,000
• C)$95,200
• D)$144,000
• E)$184,800

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Definitions:

Self-Determination Theory

A theory of motivation that emphasizes the role of autonomy, competence, and relatedness in fostering well-being and personal growth.

Symbolic Immortality

A culturally shared belief that, by being part of something greater and more enduring than our individual selves, some part of us will live on after we die.

Basic Human Need

Fundamental requirements necessary for individuals to survive and thrive, including food, water, shelter, and social interaction.

Action Identification Theory

A theory that describes how people understand and perceive their actions; it looks at how individuals identify and frame their actions based on their motivations and goals.