The Zeron Corporation Wants to Purchase a New Machine for Its

question 103

Multiple Choice

The Zeron Corporation wants to purchase a new machine for its factory operations at a cost of $475,000. The investment is expected to generate $175,000 in annual cash flows for a period of four years. The required rate of return is 14%. The old machine can be sold for $25,000. The machine is expected to have zero value at the end of the four-year period. What is the net present value of the investment? Would the company want to purchase the new machine? Income taxes are not considered.

• A)$59,775; yes
• B)$34,775; no
• C)$509,775; yes
• D)$163,375; no

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Definitions:

Haida Poles

Totem poles created by the Haida people of the Pacific Northwest, serving as representations of family lineage, myths, and events, richly carved and painted.

Totemic Emblems

Symbols or objects representing a totem, which is often an animal or other natural figure, believed to have spiritual significance to a group or clan.

Clan Groups

Social units comprising families or communities that share a common ancestry and culture, often found in tribal societies.

Stonemasonry

The craft of shaping, arranging, and assembling stones to create structures or sculptures, a practice dating back to ancient times.