(Present Value Tables Are Needed

question 29

Multiple Choice

(Present value tables are needed. ) Mulheim Corporation is deciding whether to automate one phase of its production process.The equipment has a six-year life and will cost $410,000.Projected net cash inflows from the equipment are as follows:

Mulheim Corporation's hurdle rate is 12%.
If Mulheim Corporation decides to refurbish the equipment at a cost of $60,000 at the end of year 6,it could be used for one more year and would have a $30,000 residual value at the end of year 7.Assume the cash inflow in year 7 is $65,000.What is the NPV of just the refurbishment?

• A)($1,040)
• B)$12,520
• C)$15,820
• D)$46,240

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Definitions:

Weekly Income

The total amount of money earned or received by an individual or entity in one week.

Standard Deviation

An indicator of the spread or dissimilarity among a group of numbers, showing the extent to which these numbers vary from the average.

Same Company

Refers to entities or units that operate under the same ownership or management, indicating they belong to the same parent organization.

Independent of One Another

A concept where events or variables do not affect or influence each other.