Eureka Company Is Considering Replacing an Old Computer with a New

question 51

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 approximate present value of the after-tax net annual cash operating inflows for all years?

• A) $12,334.
• B) $23,024.
• C) $28,780.
• D) $41,114.

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Definitions:

Standard Deviation

A statistic that measures the dispersion of a dataset relative to its mean, indicating how spread out the data points are.

Bowling Scores

The numerical representation of a player's performance in the game of bowling, calculated by the number of pins knocked down.

Mean

A statistical measure representing the average of a set of numbers, calculated by dividing the sum of all values by the count of values.

Standard Deviation

A statistical measure that quantifies the amount of variation or dispersion of a set of data values.