The Following Present Value Factors Are Provided for Use in This

question 181

Multiple Choice

The following present value factors are provided for use in this problem. $\begin{array} { | l | l | l | } \hline \text { Periods } & \text { Present value of } \mathbf { \$ 1 } \text { at } \mathbf { 8 \% } & \text { Present value of an annuity of } \mathbf { \$ 1 } \text { at } \mathbf { 8 \% } \\\hline 1 & 0.9259 & 0.9259 \\\hline 2 & 0.8573 & 1.7833 \\\hline 3 & 0.7938 & 2.5771 \\\hline 4 & 0.7350 & 3.3121 \\\hline\end{array}$
Xavier Co. wants to purchase a machine for $37,000 with a four-year life and a $1,000 salvage value. Xavier requires an 8% return on investment. The expected year-end net cash flows are
$12,000 in each of the four years. What is the machine's net present value?

• A) $3,480.
• B) $(3,480).
• C) $40,480.
• D) $(2,745).
• E) $2,745.

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Definitions:

Economies of Scale

The economic benefits that businesses gain from operating at a larger scale, typically resulting in lower costs per unit of production as the scale increases.

Economies of Scope

Cost advantages that a business experiences when it increases the variety of products or services it offers, leveraging shared operations or resources.

Market Share

The portion of a market controlled by a particular company or product, often expressed as a percentage of total sales in that market.

Profitability

The degree to which a business or activity yields profit or financial gain, often expressed as a percentage of revenue.