Use the Information Below to Answer the Following Question(s)

question 131

Multiple Choice

Use the information below to answer the following question(s) .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 of now, it may be sold for $30,000.The new machine will cost $200,000, an additional cash investment in working capital of $60,000 will be required and will be returned at the end of the project.The machine is expected to last 3 years and has an estimated disposal value at that time of $20,000.The new machine will reduce the average amount of time required to wash clothing and will decrease labour costs.The investment is expected to net $50,000 in additional cash inflows during the year of acquisition and $150,000 each additional year of use.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.
-Project ABC is under consideration.Annual cash flows equal $50,000 per year for 5 years.During the first three years the required rate of return is 2 percent.The required rate of return for cash flows in the final two years is 10 percent.What is the present value of cash inflows?

• A)$250,000
• B)$247,730
• C)$235,650
• D)$209,391
• E)$203,642

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Definitions:

Unproductive

Not producing or able to produce large amounts of goods, services, or results.

Discrepancy

The difference or inconsistency between two or more elements, such as expectations and reality.

Nonverbal Communication

The transmission of messages or signals through a non-linguistic means, such as body language, facial expressions, gestures, and posture.

Cathartic Release

A psychological concept where expressing or letting out emotions is believed to provide relief from emotional distress.