Use the Information Below to Answer the Following Question(s)

question 168

Multiple Choice

Use the information below to answer the following question(s) .Hawkeye Cleaners has been considering the purchase of an industrial dry-cleaning machine.The existing machine is operable for three more years and will have a zero disposal price.If the machine is disposed of now, it may be sold for $30,000.The new machine will cost $200,000, an additional cash investment in working capital of $60,000 will be required and will be returned at the end of the project.The machine is expected to last 3 years and has an estimated disposal value at that time of $20,000.The new machine will reduce the average amount of time required to wash clothing and will decrease labour costs.The investment is expected to net $50,000 in additional cash inflows during the year of acquisition and $150,000 each additional year of use.These cash flows will generally occur throughout the year and are recognized at the end of each year.Income taxes are not considered in this problem.
-What is the net present value (rounded to the nearest thousand) of the investment assuming the required rate of return is 24 percent? Would Hawkeye Cleaners want to purchase the new machine?

• A)$57,000; yes
• B)$(57,000); no
• C)$(3,000); no
• D)$29,000; yes
• E)$(13,000); no

Calculate customer cost analysis in time-driven activity-based costing.

Identify and apply the cost per minute rate for resources supplied.

Analyze the impact of matching capacity with demand on expenses.

Determine the time-driven activity rates for specific tasks.

---

Definitions:

Interest Rate Movements

The fluctuations in interest rates which can affect the cost of borrowing money and the performance of investments.

Interest Rates

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan amount.

Supply and Demand

Economic model describing how prices vary as a result of a balance between product availability and the desire of consumers.

Federal Reserve

The central banking system of the United States, responsible for setting monetary policy, regulating banks, and providing financial services to the government.