(Ignore Income Taxes in This Problem

question 93

Multiple Choice

(Ignore income taxes in this problem.) Morrel University has a small shuttle bus that is in poor mechanical condition. The bus can be either overhauled now or replaced with a new shuttle bus. The following data have been gathered concerning these two alternatives:
The University could continue to use the present bus for the next seven years. Whether the present bus is used or a new bus is purchased, the bus would be traded in for another bus at the end of seven years. The University uses a discount rate of 12% and the total cost approach to net present value analysis.
-If the new bus is purchased,the present value of the annual cash operating costs associated with this alternative is closest to:

• A) $(54,800)
• B) $(36,500)
• C) $(16,200)
• D) $(42,800)

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Definitions:

Incidental Damages

Expenses reasonably incurred by one party due to another party's breach of contract, such as costs to mitigate damages or to obtain substitute performance.

Arise Directly

Refers to issues or consequences that occur as a direct result of an action or event, with no intermediary steps.

Restitution

Restitution is the act of compensating for loss or damage caused by one’s actions, often involving the return of stolen goods or payment of money to cover damages.

Voidable Contract

A contract that is valid and enforceable on the surface, but can be declared void by one of the parties due to certain defects.