Gamma Electronics Is Considering the Purchase of Testing Equipment That

question 77

Multiple Choice

Gamma Electronics is considering the purchase of testing equipment that will cost $500,000.The equipment has a 5-year lifetime with no salvage value.Assume the new machine will generate after-tax savings of $100,000 per year for the five years.
If the firm has a 15% cost of capital,what is the equivalent annual cost of the equipment?

• A) $32,924
• B) $42,746
• C) $49,158
• D) $37,863

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Definitions:

Expression

A combination of variables, operators, and values that produces a result or value when evaluated.

Binary Operators

Operators that operate on two operands and perform operations like addition, subtraction, multiplication, or logical comparison.

Unary Operators

Operators that operate on a single operand to perform various operations like negation, increment, or decrement.

Operands

The entities on which operators perform operations in expressions, such as variables or values.