Mountain Fresh Water Company Is Considering Two Mutually Exclusive Machines

question 87

Multiple Choice

Mountain Fresh Water Company is considering two mutually exclusive machines.Machine A has an up-front cost of $100,000 (CF₀ = -100,000) ,and it produces positive after-tax cash inflows of $40,000 a year at the end of each of the next six years.Machine B has an up-front cost of $50,000(CF₀ = ?50,000) ,and it produces after-tax cash inflows of $30,000 a year at the end of the next three years.The company's cost of capital is 10.5%.Based on the equivalent annual annuity,which machine will be chosen?

• A)Afor$71,687
• B)A for $16,702
• C)B for $23,954
• D)B for $9,718

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Definitions:

Foot-in-the-door Technique

A persuasion strategy where a small request is initially made to gain compliance, followed by a larger request related to the first one.

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The aspects that make up attitudes, typically including cognitive (beliefs), affective (emotions), and behavioral (actions) elements.

Social Roles

The parts individuals play as members of a social group, which come with expected behaviors, responsibilities, and norms.

Zimbardo Experiment

A psychological study conducted by Philip Zimbardo in 1971 to investigate the effects of perceived power, focusing on the struggle between prisoners and prison guards in a simulated environment.