Gamma Electronics Gamma Electronics Is Considering the Purchase of Testing Equipment That

question 66

Multiple Choice

Gamma Electronics
Gamma Electronics is considering the purchase of testing equipment that will cost $500,000 to replace old equipment. Assume the new machine will generate after-tax savings of $250,000 per year over the next four years.
-If Gamma Electronics has a 15% cost of capital,what's the IRR of the investment?

• A) 23.4%
• B) 15.0%
• C) 34.9%
• D) 100.0%

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Definitions:

Neap Tide

Lower-than-average high tides and higher-than-average low tides caused when the Sun’s gravity partially offsets the effects of the Moon’s gravity.

High Tide

The maximum height to which water in the ocean rises relative to the land in response to the gravitational pull of the Moon; also refers to the time when such high levels occur.

Low Tide

The lowest height to which water in the ocean drops relative to the land in response to the gravitational pull of the Moon; also refers to the time when such low levels occur.

Spring Tide

A condition of especially high and low tides caused when the sun, moon, and Earth are aligned, increasing the gravitational pull on the oceans.