Answer the Following Questions Using the Information Below

question 112

Multiple Choice

Answer the following questions using the information below:
Cronulla Cleaners is 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.The machine may be sold for $50 000 now.The new machine will cost $200 000 and an additional cash investment in working capital of $50 000 will be required.The new machine will reduce the average time required to wash clothing and will decrease labour costs.The investment is expected to net $45 000 in additional cash inflows during the year of acquisition and $135 000 each additional year of use.The new machine has a three-year life,and zero disposal value.These cash flows will occur throughout the year but will be recognised 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 10%? Would the company want to purchase the new machine?

• A)$53 800;yes
• B)$45 000;no
• C)$(53 800);no
• D)$(45 000);yes

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Definitions:

Impression Management

The process by which individuals attempt to control the perceptions or impressions others have of them.

Tactic

A specific action or strategy planned to achieve a particular goal.

Attribution Process

The attribution process involves the way individuals interpret and assign causes to behaviors and events, essentially explaining why things happen.

Internal Causes

Reasons or factors within an organization or individual that lead to a specific effect or outcome, contrasting with external influences.