Table 11.2 Computer Disk Duplicators, Inc. Has Been Considering Several Capital Investment

question 44

Multiple Choice

Table 11.2
Computer Disk Duplicators, Inc. has been considering several capital investment proposals for the year beginning in 2014. For each investment proposal, the relevant cash flows and other relevant financial data are summarized in the table below. In the case of a replacement decision, the total installed cost of the equipment will be partially offset by the sale of existing equipment. The firm is subject to a 40 percent tax rate on ordinary income and on long-term capital gains. The firm's cost of capital is 15 percent.
________________________________________________________ *Not applicable
-For Proposal 2, the initial outlay equals ________. (See Table 11.2)

• A) $120,720 cash outflow
• B) $164,560 cash outflow
• C) $150,000 cash outflow
• D) $167,520 cash outflow

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Definitions:

Net Loss

Occurs when a company's expenses exceed its revenues during a specific period, leading to a negative profit.

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period, detailing revenues, expenses, and profits or losses.

Revenues

The total amount of income generated by the sale of goods or services related to the company's primary operations.

Expenses

Costs incurred in the process of earning revenue, including operational, administrative, and marketing costs.