(Ignore Income Taxes in This Problem

question 61

Multiple Choice

(Ignore income taxes in this problem.) Paragas, Inc., is considering the purchase of a machine that would cost $370,000 and would last for 8 years. At the end of 8 years, the machine would have a salvage value of $52,000. The machine would reduce labor and other costs by $96,000 per year. Additional working capital of $4,000 would be needed immediately. All of this working capital would be recovered at the end of the life of the machine. The company requires a minimum pretax return of 19% on all investment projects.
-The combined present value of the working capital needed at the beginning of the project and the working capital released at the end of the project is closest to:

• A) $(3,004)
• B) $0
• C) $(12,080)
• D) $11,816

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Definitions:

Situational Interview

A job interview method where candidates are asked to describe how they would handle specific job-related situations, testing their problem-solving and decision-making abilities.

Poor Prediction Rate

The occurrence of low accuracy in forecasting future events, outcomes, or behaviors, often due to inadequate information or model flaws.

Ability Test

An assessment used to measure specific skills or competencies, often related to intellectual or physical capabilities.

Selection Procedures

The processes and methods used by organizations to assess and choose candidates for employment.