Walker & Campsey Wants to Invest in a New Computer

question 41

Multiple Choice

Walker & Campsey wants to invest in a new computer system,and management has narrowed the choice to Systems A and B.​System A requires an up-front cost of $100,000,after which it generates positive after-tax cash flows of $60,000 at the end of each of the next two years.System B also requires an up-front cost of $100,000,after which it generates positive after-tax cash flows of $48,000 at the end of each of the next three years.The company's cost of capital is 11%.Based on the equivalent annual annuity,which system will be chosen?

• A)A for $1,622.88
• B)B for $1,622.88
• C)A for $7,083.47
• D)B for $7,083.47

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Definitions:

Taste Preferences

Individual inclinations towards liking or disliking certain flavors and types of food, which can be influenced by genetics, culture, and personal experiences.

Genetic Drift

A mechanism of evolution that refers to random changes in the frequency of alleles within a population over time.

Inclusive Fitness

A concept in evolutionary biology predicting an organism's genetic success based on both its own offspring's survival and the support of relatives' offspring.

Adaptation

The process by which organisms adjust to new environments or changes in their current environment.