A Company Can Buy a Machine That Is Expected to Have

question 133

Multiple Choice

A company can buy a machine that is expected to have a three-year life and a $30,000 salvage value. The machine will cost $1,800,000 and is expected to produce a $200,000 after-tax net income to be received at the end of each year. If a table of present values of $1 at 12% shows values of 0.8929 for one year, 0.7972 for two years, and 0.7118 for three years, what is the net present value of the cash flows from the investment, discounted at 12%?

• A) $705,391
• B) $1,918,855
• C) $583,676
• D) $629,788
• E) $118,855

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Definitions:

Ho Chi Minh Trail

A network of paths and roads used by North Vietnam during the Vietnam War to transport troops and supplies to the Viet Cong in South Vietnam.

Underground

Operating secretly, especially as part of a resistance movement, subculture, or in illegal activities.

Camouflage

A method of disguise that allows an object or person to remain unnoticed by blending in with its surroundings.

Minimal Results

Outcomes or effects that are very small or insignificant, especially in comparison to the effort or expectations invested.