Answer the Following Questions Using the Information Below

question 127

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 24%? Would the company want to purchase the new machine?

• A)$32 800;no
• B)$(5240);no
• C)$(32 800);yes
• D)$5240;yes

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Definitions:

Discrimination

The practice of according individuals or groups inferior treatment in hiring, occupational access, education and training, promotion, wage rates, or working conditions even though they have the same abilities, education, skills, and work experience as other workers.

Labor Force

The total number of people employed or actively seeking employment in an economy or specific labor market.

Competitive Economy

An economic system where businesses operate in a free market, with minimal barriers to entry and where prices are determined by supply and demand.

Demand Curves

Graphs that show the relationship between the price of a good and the quantity demanded by consumers at those prices.