Sheridan Films Is Considering Some New Equipment Whose Data Are

question 68

Multiple Choice

Sheridan Films is considering some new equipment whose data are shown below. The equipment has a 3-year tax life and would be fully depreciated by the straight-line method over 3 years, but it would have a positive pre-tax salvage value at the end of Year 3, when the project would be closed down. Also, some new working capital would be required, but it would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV?
$\begin{array}{lr}\text { Project cost of capital ( } r \text { ) } & 10.0 \% \\\text { Net investment in fixed assets (depreciable basis) } & \$ 70,000 \\\text { Required new working capital } & \$ 10,000 \\\text { Straight-line deprec. rate } & 33.333 \% \\\text { Sales revenues, each year } & \$ 75,000 \\\text { Operating costs (excl. deprec.) , each year } & \$ 30,000 \\\text { Expected pretax salvage value } & \$ 5,000 \\\text { Tax rate } & 350 \%\end{array}$

• A) $20,762
• B) $21,854
• C) $23,005
• D) $24,155
• E) $25,363

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Definitions:

Personality Dimensions

Broad categories used to describe and generalize about the various traits and characteristics that make up an individual's personality.

Hans Eysenck

A British psychologist known for his work on the structure of human personality, emphasizing temperament and intelligence.

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A personality trait characterized by outgoingness, high energy, and positive emotions towards social engagements and external stimuli.

R Technique

A statistical method used for analyzing relationships between variables or identifying patterns within data.