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

question 98

Multiple Choice

Quip 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 the straight-line depreciation and expects the machine to have a residual value of $50,000.Quip's tax rate is 40%.Management requires a minimum of 10% return on all investments.What is the investment's net present value (NPV) of the proposed investment (rounded to the nearest hundred) ? (The PV annuity factor for 10%,5 years,is 3.791 and for 4 years it is 3.17.The present value factor for 10%,5 years,is 0.621. ) Assume that cash inflows occur at year-end.

• A)$48,800.
• B)$79,800.
• C)$99,000.
• D)$112,000.

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Definitions:

Hyoid Bone

A horseshoe-shaped bone in the neck that supports the tongue and is the only bone in the body not attached to another bone.

Larynx

The voice box located in the throat, responsible for producing sound, protecting the trachea during swallowing, and regulating airflow.

Trigeminal Nerve

The fifth cranial nerve responsible for sensory data from the face and motor functions such as biting and chewing.

Ansa Cervicalis

A looped network of nerves in the neck that supplies motor innervation to some of the muscles of the larynx and the infrahyoid muscles.