Your Company Is Deciding When to Invest in a New

question 78

Multiple Choice

Your company is deciding when to invest in a new machine.The new machine will increase cash flow by $240,000 per year.You believe the technology used in the machine has a 10-year life; in other words,no matter when you purchase the machine,it will be obsolete 10 years from today.The machine is currently priced at $1,200,000.The cost of the machine will decline by $120,000 per year until it reaches $720,000,where it will remain.Your required return is 8 percent.In which year should you purchase the machine?

• A)Year 0
• B)Year 1
• C)Year 2
• D)Year 3
• E)Year 4

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Definitions:

Scientific Method

A systematic procedure for collecting and analyzing evidence that involves observation, hypothesis formation, experimentation, and conclusion drawing.

Psychology

The scientific study of the mind and behavior, encompassing various aspects of human experience, cognition, and emotion.

Empirical Claims

Claims that can be true or false depending on the facts.

Prove

To demonstrate the truth or existence of something through evidence or argument.