PDF CorpNeeds to Replace an Old Lathe with a New,more Efficient

question 88

Multiple Choice

PDF Corp.needs to replace an old lathe with a new,more efficient model.The old lathe was purchased for $50,000 nine years ago and has a current book value of $5,000.(The old machine is being depreciated on a straight-line basis over a ten-year useful life.) The new lathe costs $100,000.It will cost the company $10,000 to get the new lathe to the factory and get it installed.The old machine will be sold as scrap metal for $2,000.The new machine is also being depreciated on a straight-line basis over ten years.Sales are expected to increase by $8,000 per year while operating expenses are expected to decrease by $12,000 per year.PDF's marginal tax rate is 40%.Additional working capital of $3,000 is required to maintain the new machine and higher sales level.The new lathe is expected to be sold for $5,000 at the end of the project's ten-year life.What is the project's terminal cash flow?

• A) $3,000
• B) $5,000
• C) $6,000
• D) $8,000

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Definitions:

Mental Disorders

Conditions characterized by disturbances in a person's thoughts, emotions, or behavior.

Predisposition

A natural inclination or tendency to behave in a certain way or to develop a particular condition based on genetic or environmental factors.

Mental Disorder

A condition characterized by disturbances in a person's thinking, emotional regulation, or behavior, causing distress or impaired function.

Maladaptive

Descriptive of actions or behaviors that are counterproductive to situational demands, impairing the ability to effectively adjust or cope.