The Company Uses Straight-Line Depreciation on All Equipment

question 65

Multiple Choice

$\begin{array}{l}\text { Oriental Company has gathered the following data on a proposed investment project: }\\\begin{array} { | l | r | } \hline \text { Investement in Depreciable Equipment } & \$ 200,000 \\\hline\end{array}\end{array}$
$\begin{array}{|l|r|}\hline \text { Annual Net Cash Flows } & \$ 50,000 \\\hline \text { Life of the Equipment } & 10 \text { years } \\\hline \text { Salvage Value } & -0- \\\hline \text { Discount Rate } & 10 \%\\\hline\end{array}$
The company uses straight-line depreciation on all equipment. (Ignore income taxes in this problem.)
- What would be the net present value of this investment? (Do not round your intermediate calculations and round your final answer to the nearest whole number.)

• A) ($14,350).
• B) $77,200.
• C) $107,228.
• D) $200,000.

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Definitions:

Departmental Overhead Rates

Specific rates used to allocate overhead costs to products or cost objects based on the expenses of different departments.

Allocation Base

A measure used to distribute costs among different departments, products, or activities, typically related to the amount of resources consumed.

Unit Product Costs

The complete expense incurred in the creation of a single unit of a product, encompassing materials, workforce, and indirect costs.

Indirect Labor

Labor costs associated with employees who do not directly work on a product, but whose services are necessary for the manufacturing process.