Clara's Custom Curtains Inc

question 48

Essay

Clara's Custom Curtains Inc.is considering the purchase of a new high-tech sewing machine.The machine will have an initial cost of $15 000 and an estimated salvage value of $1000 at the end of its useful life.The company expects annual net operating cash inflows to increase $4000 each year for six years.The company has a cost of capital of 12 per cent.
Required:
A. If the company ignores income taxes, compute the net present value of the machine.
B. If the company takes into account income taxes using a 40 per cent income tax rate, and the machine will be depreciated over its six-year life using the straight-line method, compute the net present value.

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Definitions:

Intrinsic Rewards

The internal satisfaction and joy derived from performing an activity or achieving a goal, rather than from any external benefits or rewards.

Hierarchy of Needs

A theory in psychology proposed by Abraham Maslow, suggesting humans are motivated by five basic categories of needs: physiological, safety, love/belonging, esteem, and self-actualization.

Theory X

A management theory suggesting that employees are naturally unmotivated and dislike work, implying the need for control and direction.

Motivation

The reason or reasons one has for acting or behaving in a particular way.