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Treads Corporation Is Considering the Replacement of an Old Machine

question 3

Multiple Choice

Treads Corporation is considering the replacement of an old machine that is currently being used. The old machine is fully depreciated but can be used by the corporation for five more years. If Treads decides to replace the old machine, Picco Company has offered to purchase the old machine for $60,000. The old machine would have no salvage value in five years.

The new machine would be acquired from Hillcrest Industries for $1,000,000 in cash. The new machine has an expected useful life of five years with no salvage value. Due to the increased efficiency of the new machine, estimated annual cash savings of $300,000 would be generated.

Treads Corporation uses a discount rate of 12%. (Ignore income taxes in this problem.)

-The internal rate of return of the project is closest to which of the following?

Definitions:

Madagascaran Mantid

A type of praying mantis native to Madagascar known for its unique adaptation and predatory behavior.

Camouflage

An adaptation that allows organisms to blend in with their environment, reducing visibility to predators or prey, and enhancing survival chances.

Adaptive

Having the ability to adjust to new conditions or environments, enhancing an organism's survival and reproductive success.

Antipredator Value

The effectiveness of an organism's physical or behavioral traits in deterring attacks from predators.