Home Products, Inc

question 75

Multiple Choice

Home Products, Inc. is evaluating the purchase of a new machine to use in its manufacturing process. The new machine would cost $40,000 and have a useful life of 6 years. At the end of the machine's life, it would have a residual value of $2,500. Annual cost savings from the new machine would be $12,400 per year for each of the six years of its life. Home Products, Inc. has a minimum required rate of return of 16% on all new projects. The net present value of the new machine would be closest to

• A) $4,669.
• B) $5,694.
• C) $6,719.
• D) $46,719.

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Definitions:

Social Loafing

The phenomenon whereby individuals reduce their effort when working in a group compared to when working alone, due to perceived diffusion of responsibility.

Audience Effect

The impact on an individual's performance when they are aware they are being observed by others.

Co-action Effect

A phenomenon where the presence of others engaged in the same task can improve individual performance.

Social Facilitation

The tendency for people to perform differently when in the presence of others than when alone, typically improving on well-practiced tasks.