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

question 22

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.
-Weston Ltd.is considering investing in a new piece of equipment for its factory.It estimates that the machine will generate an additional $120,000 per year in revenues.The contribution margin on these incremental revenues is estimated at 40%.Incremental annual fixed costs are estimated to be $8,200.The equipment would have a salvage value of $14,000 at the end of 6 years.The company's required rate of return is 13%.What is the net present value of this investment if the equipment costs $250,000? (Ignore income taxes.)

Definitions:

Psychological Contract

The unwritten, implicit agreements and expectations between an employer and employees regarding treatment, responsibilities, and benefits.

Social Contract

A theoretical agreement within a society regarding the rights and duties of the state and its citizens, often used to justify political or moral obligations.

Labor Utilization

The strategic use and management of human resources to optimize productivity and efficiency in the workplace.

Work Hours

The duration of time that employees spend performing their job duties during a given day or week.