Use the Information Below to Answer the Following Questions Depreciation Has Been Calculated on a Straightline Basis

question 24

Multiple Choice

Use the information below to answer the following questions.
Y3 Ltd is expanding its production of binoculars. The plant is expected to cost $750,000, have a life of 5 years, and a nil residual value. It will be ready for operation on 31 December 2017. The following statement of comprehensive income figures for the new binoculars are forecast: $\begin{array}{llllll}&2018 & 2019 & 2020 & 2021 & 2022 \\&\$ \mathrm{~m} & \$ \mathrm{~m} & \$ \mathrm{~m} & \$ \mathrm{~m} & \$ \mathrm{~m}\\\text { Sales } & 1.5 & 1.3 & 1.4 & 1.2 & 1.1 \\\text { Costs (including depreciation) } & 1.0 & 1.0 & 1.0 & 1.0 & 1.0 \\\hline \text { Profit before tax } & \underline{0.5} & 0.3 & 0.4 & 0.2 & 0.1\end{array}$ Depreciation has been calculated on a straightline basis. You should assume that all cash flows occur at the end of the year in which they arise. The company's cost of capital is 10%. Ignore taxation.
-Refer to the table above. The net present value (rounded) is:

• A)$984,000.
• B)$1,019,900.
• C)$883,000.
• D)$860,500.

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Definitions:

Ventral

Relating to the body's front or anterior part, and the opposite of the dorsal side.

Internal Nares

Openings located inside the nasal cavity, also known as choanae, they connect the nose to the throat.

Nasopharynx

The upper part of the throat located behind the nose, connecting the nasal cavity to the throat and playing a role in respiration and vocalization.

Epiglottis

A flap of cartilage located at the root of the tongue, which is depressed during swallowing to cover the opening of the windpipe.