Jasper Metals Is Considering Installing a New Molding Machine Which

question 24

Multiple Choice

Jasper Metals is considering installing a new molding machine which is expected to produce operating cash flows of $73,000 a year for 7 years.At the beginning of the project,inventory will decrease by $16,000,accounts receivables will increase by $21,000,and accounts payable will increase by $15,000.All net working capital will be recovered at the end of the project.The initial cost of the molding machine is $249,000.The equipment will be depreciated straight-line to a zero book value over the life of the project.The equipment will be salvaged at the end of the project creating a $48,000 aftertax cash flow.At the end of the project,net working capital will return to its normal level.What is the net present value of this project given a required return of 14.5 percent?

• A)$77,211.20
• B)$79,418.80
• C)$82,336.01
• D)$84,049.74
• E)$87,925.54

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Definitions:

Oral Contract

An agreement between parties that is spoken rather than written but is still legally binding.

Quasi Contract

An obligation imposed by law to prevent unjust enrichment, even though no formal contract exists between the parties.

Remedies

The means by which a right is enforced or the violation of a right is prevented, redressed, or compensated.

Sale of Goods

A transactional agreement between a seller and a buyer for the exchange of personal property for a certain price.