(Appendix 13C) Bourland Corporation Is Considering a Capital Budgeting Project

question 146

Multiple Choice

(Appendix 13C) Bourland Corporation is considering a capital budgeting project that would require investing $80,000 in equipment with an expected life of 4 years and zero salvage value. Annual incremental sales would be $250,000 and annual incremental cash operating expenses would be $180,000. The project would also require a one-time renovation cost of $40,000 in year 3. The company's income tax rate is 30% and its after-tax discount rate is 8%. The company uses straight-line depreciation. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting.
-The net present value of the entire project is closest to:

• A) $79,928
• B) $159,928
• C) $120,080
• D) $112,000

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Definitions:

Sperry's Five Premises

A set of principles related to the brain and consciousness, developed by Roger Sperry, highlighting the importance of hemispheric specialization.

Personality Disorders

A class of mental disorders characterized by enduring maladaptive patterns of behavior, cognition, and inner experience, exhibited across many contexts and deviating markedly from those accepted by the individual's culture.

Psychopathy

A behavioral condition marked by continual disregard for others, diminished capacity for empathy and guilt, and features that are fearless, unrestrained, and narcissistic.

Antisocial Personality Disorder

Antisocial Personality Disorder is characterized by a long-term pattern of disregard for, or violation of, the rights of others.