Arnold Is Acquiring a New Machine with a Life of 5

question 5

Multiple Choice

Arnold is acquiring a new machine with a life of 5 years for use on its production line. The following data relate to this purchase: The new machine would replace an old fully-depreciated machine. The old machine can be sold for $15,000 at the time the new equipment is acquired. The income tax rate is 30%, and the discount rate is 12%. Arnold uses the straight-line method for depreciation on all machines (ignore the half-year convention) .
The present value of the cash flows from the sale of the old machine is

• A) $15,000
• B) $13,395
• C) $16,340
• D) $17,860

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Definitions:

Self-Fulfilling Prophecies

Situations in which a belief or expectation leads to its own fulfillment, due to the behavior of the person holding the belief or those around them.

Implicit Associations

Implicit associations are unconscious links between concepts or objects and attitudes or stereotypes, revealing hidden biases and preferences.

Primacy Effect

The tendency to remember information at the beginning of a list better than information that comes later.

Impression Formation

The process by which individuals organize information about another person to form an overall impression of that person.