(Ignore Income Taxes in This Problem

question 83

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 present bus is repaired,the present value of the salvage received on sale of the bus seven years from now is closest to:

• A) $(2,260)
• B) $2,260
• C) $904
• D) $(904)

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Definitions:

Investment Bank

A financial institution that assists individuals, corporations, and governments in raising financial capital by underwriting or acting as the client's agent in the issuance of securities.

Federal Budget Deficits

The shortfall that occurs when the U.S. government's expenditures exceed its revenues within a fiscal year.

Interest Rates

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

Aggregate Demand

The total amount of goods and services demanded in an economy at a given overall price level and in a given time period.