(Ignore Income Taxes in This Problem

question 109

Multiple Choice

(Ignore income taxes in this problem.) The management of Opray Corporation is considering the purchase of a machine that would cost $360,000, would last for 7 years, and would have no salvage value. The machine would reduce labor and other costs by $78,000 per year. The company requires a minimum pretax return of 11% on all investment projects.
-The present value of the annual cost savings of $78,000 is closest to:

• A) $763,064
• B) $177,027
• C) $546,000
• D) $367,536

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Definitions:

Securities Litigation Uniform Standards Act of 1998

A United States federal law that preempts class-action lawsuits related to securities fraud from being brought under state law, requiring instead that they be brought under federal law.

1933 Act

Also known as the Securities Act of 1933, it's a U.S. law enacted to ensure that investors receive significant information regarding securities being offered for public sale, and to prevent deceit, misrepresentations, and other frauds in the sale of securities.

State Court

A court that has jurisdiction over disputes with some connection to a U.S. state, as opposed to the federal court system.

Section 16(b)

A provision of the Securities Exchange Act that aims to prevent unfair use of nonpublic information by requiring insiders to return any profits made from buying and selling their company's stock within a short time frame.