Stratford Company Purchased a Machine with an Estimated Useful Life

question 27

Multiple Choice

Stratford Company purchased a machine with an estimated useful life of seven years.The machine will generate cash inflows of $90,000 each year over the next seven years.If the machine has no salvage value at the end of seven years,and assuming the company's discount rate is 10%,what is the purchase price of the machine if the net present value of the investment is $170,000? (Ignore income taxes in this problem.) (Do not round your intermediate calculations and round the final answer to the nearest whole dollar.)

• A) $170,000.
• B) $221,950.
• C) $268,158.
• D) $608,157.

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Definitions:

U.S. GAAP

Generally Accepted Accounting Principles in the United States, a framework of accounting standards, principles, and procedures.

Disclosed

The act of making information known or revealed, often in a financial context.

Operating Segments

Components of a business for which separate financial information is available and is evaluated regularly by the chief operating decision-maker to allocate resources and assess performance.

Disclosed

Disclosed means to make known or reveal information that was previously secret or unknown.