Eureka Company Is Considering Replacing an Old Computer with a New

question 3

Multiple Choice

Eureka Company is considering replacing an old computer with a new computer. The following data relate to this investment decision:
$\begin{array}{|l|r|}\hline \text { Cost of the new computer } & \$ 40,000 \\\hline \text { Annual cash operating costs of the new computer } & \$ 10,000 \\\hline \text { Working capital needed now for the new computer } & \$ 2,000 \\\hline \text { Useful life of the new computer } & 6 \text { Years } \\\hline \text { Salvage value of the new computer at the End of six years } & \$ 3,000 \\\hline \text { Original cost of the old van two years ago } & \$ 18,000 \\\hline \text { Salvage value of the old computer now } & \$ 4,000 \\\hline \text { Salvage value of the old computer six years from now } & \$ 0 \\\hline\end{array}$
The new computer will belong to Class 10 with a maximum CCA rate of $30 \%$ . The income tax rate is also $30 \%$ , and the company's after-tax cost of capital is $12 \%$ .
-What is the present value of the before-tax proceeds that will be received on the sale of the old computer?

• A) $0.
• B) $1,200.
• C) $2,800.
• D) $4,000.

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Definitions:

Self-Serving Bias

The common human tendency to attribute positive events to one's own character but attribute negative events to external factors.

Response Set

A collection of all possible answers or outputs that can be given in response to a stimulus or question in a survey, test, or experiment.

Social Loafing

The phenomenon where individuals exert less effort to achieve a goal when they work in a group than when they work alone.

Feedback Response

Feedback response refers to the reaction or changes made by individuals or systems upon receiving feedback, aiming to improve or adjust behavior, performance, or processes.