Fagen Grocery Store Is Considering the Purchase of a New

question 111

Multiple Choice

Fagen Grocery Store is considering the purchase of a new $45,000 delivery truck. The truck will have a useful life of 5 years, no terminal salvage value, and tax amortization will be calculated using the straight-line method.
If the truck is purchased, the company will be able to increase annual revenues by $90,000 per year for the life of the truck, but out-of-pocket expenses will also increase by $67,500 per year.
Assume a tax rate of 30 percent and a required after-tax rate of return equal to 10 percent.
Time value factors are given below for 5 years and an interest rate of 10 percent.

-What is the total net present value of the investment?

• A) $69,941
• B) $24,941
• C) $42,000
• D) $(33,545)

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Definitions:

Delusions of Grandeur

False beliefs about one's own importance, power, or talents, often occurring in psychiatric conditions like schizophrenia.

Bipolar Disorder

A disorder in which the mood alternates between two extreme poles (elation and depression); also referred to as manic depression.

Mood Disorders

A category of mental health disorders characterized by persistent changes in mood, encompassing major depression and bipolar disorder.

Depressed

A mood disorder marked by persistent feelings of sadness, hopelessness, and a lack of interest or pleasure in activities.