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

question 54

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 3, the incremental depreciation expense for year 3 is ________. (See Table 11.2)

• A) $21,000
• B) $42,000
• C) $47,850
• D) $50,850

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Definitions:

Risk-Averse

A tendency to avoid taking risks, preferring safer or more predictable outcomes over uncertainty.

Risk-Seeking

characterizes the tendency of an individual or entity to take decisions that have a significant level of uncertainty or potential for negative outcomes in the hope of achieving higher gains.

Risk Technique

Methods or strategies used to identify, assess, and manage potential risks in a project or process to minimize negative outcomes.

Groupthink

A phenomenon where a group makes faulty or ineffective decisions for the sake of reaching a consensus, often suppressing dissenting viewpoints.