Answer the Following Questions Using the Information Below

question 120

Multiple Choice

Answer the following questions using the information below:
Hawkeye Cleaners has been considering the purchase of an industrial dry-cleaning machine. The existing machine is operable for three more years and will have a zero disposal price. If the machine is disposed now, it may be sold for $120,000. The new machine will cost $400,000 and an additional cash investment in working capital of $120,000 will be required. The new machine will reduce the average amount of time required to wash clothing and will decrease labor costs. The investment is expected to net $100,000 in additional cash inflows during the year of acquisition and $300,000 each additional year of use. The new machine has a three-year life, and zero disposal value. These cash flows will generally occur throughout the year and are recognized at the end of each year. Income taxes are not considered in this problem. The working capital investment will not be recovered at the end of the asset's life.
-What is the net present value of the investment, assuming the required rate of return is 24%? Would the company want to purchase the new machine?

• A)$(65,600); yes
• B)$(32,800); no
• C)$32,800; yes
• D)$65,600; no

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Definitions:

Tone

The attitude or approach that the writer or speaker takes towards the subject or the audience, often conveyed through word choice and style.

Structure

The arrangement or framework of interconnected elements in a system, organization, or composition.

Business Emails

Electronic mail messages that are used for professional correspondence between individuals in a business context.

Technical Materials

Documentation or resources that contain specialized information or instructions related to a technical field.