The Management of Wyoming Corporation Is Considering the Purchase of a New

question 16

Multiple Choice

The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for five years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment:
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-The present value index for this investment is

• A) 1.00
• B) 0.95
• C) 1.25
• D) 1.05

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Definitions:

R&D Expenditures

Funds allocated by a government, corporation, or other entity towards research and development activities aimed at innovating and improving products or processes.

Interest-Rate Cost-Of-Funds

The expense associated with borrowing funds, often determined by the interest rate at which money is borrowed.

Expected-Rate-Of-Return

The anticipated percentage of profit or loss an investment is likely to generate.

Immediate Costs

Expenses that are directly incurred and need to be paid out in the short term.