Topsider Inc

question 66

Multiple Choice

Topsider Inc.is considering the purchase of a new leather-cutting machine to replace an existing machine that has a book value of $3,000 and can be sold for $1,500.The old machine is being depreciated on a straight-line basis,and its estimated salvage value 3 years from now is zero.The new machine will reduce costs (before taxes) by $7,000 per year.The new machine has a 3-year life,it costs $14,000,and it can be sold for an expected $2,000 at the end of the third year.The new machine would be depreciated over its 3-year life using the MACRS method.Assuming a 40 percent tax rate and a required rate of return of 16 percent,find the new machine's NPV.

• A) −$2,822
• B) $1,658
• C) $4,560
• D) $15,374
• E) $9,821

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Definitions:

F Statistic

A ratio of variance estimates used in statistical analysis to test the significance of multiple group means.

Main Effect

Refers to the direct impact of an independent variable on a dependent variable in a statistical model.

P-Value

A statistical metric indicating the likelihood of obtaining the observed results when the null hypothesis of a study is true.

F Statistic

A ratio used in ANOVA and regression analysis to determine if the variances between means are statistically significant.