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

question 86

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.
-Wagner Ltd.is considering investing in a new piece of equipment for its factory.It estimates that annual cash flows would be $17,000 and the equipment would last for 8 years.The company's required rate of return is 12%.What is the most that the company should be willing to invest in this equipment? (Ignore income taxes.)

• A)$84,450
• B)$136,000
• C)$61,280
• D)$128,115
• E)$94,580

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Definitions:

Injunction

A judicial order compelling someone to do or cease doing a specific action.

Employment Contract

A legal agreement between an employer and an employee that outlines the terms and conditions of employment, including duties, compensation, and duration.

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Express Repudiation

A clear and unequivocal refusal to perform contractual obligations, indicating to the other party that the contract will not be honored.