Mac Products Inc $$\begin{array} { c c } \text { Year } & \text { Annual cash flow } \\\hline 1 &\$25000 \\2 & \$20000 \\3 & \$15000\end{array}$$

question 85

Multiple Choice

Mac Products Inc.is considering the purchase of a new machine.The estimated cost of the machine is $30 000.The machine is expected to generate annual cash inflows over the next three years as follows:
$$\begin{array} { c c } \text { Year } & \text { Annual cash flow } \\\hline 1 &\$25000 \\2 & \$20000 \\3 & \$15000\end{array}$$
The machine will be depreciated over its three-year life using the straight-line method and is not expected to have a residual value at the end of its useful life.The company considers income tax effects in all of its capital investment decisions.If the company's income tax rate is 35 per cent and they desire an after-tax return of 14 per cent on investments,the net present value of the new machine is:

• A) $ 8965
• B) $24 056
• C) $12 338
• D) $ 840

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Definitions:

Selective Retention

The process by which individuals remember only information that reinforces their personal beliefs and attitudes, ignoring contradictory evidence.

Postpurchase Stage

The phase after purchasing a product or service where consumers may evaluate their decision, experience satisfaction or dissatisfaction, and engage in behavior such as feedback or repurchase.

Selective Perception

How individuals selectively focus on certain parts of media communications that resonate with their desires, while overlooking contrary opinions.

Selective Exposure

The tendency of individuals to favor information which reinforces their pre-existing views while avoiding contradictory information.