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Answer the Following Questions Using the Information Below

question 28

Multiple Choice

Answer the following questions using the information below:
Footscray Hospital is considering purchasing a new x-ray machine.The existing machine is operable for five more years and will have a zero disposal price.The machine may be sold for $45 000 now.The new machine will cost $325 000 and an additional cash investment in working capital of $10 000 will be required.The new machine will reduce the average time required to take x-rays and will allow additional business to be done at the hospital.The investment is expected to net $30 000 in additional cash inflows during the year of acquisition and $120 000 each additional year of use.The new machine has a five-year life,and zero disposal value.These cash flows will occur throughout the year but are recognised at the end of each year.Ignore income taxes.The working capital investment will not be recovered at the end of the asset's life.
-The 'required rate-of-return' can also be expressed as:

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Definitions:

Ending Inventory

The total value of all unsold goods that a company has at the end of an accounting period.

Beginning Inventory

The value of the inventory that a company has at the start of an accounting period, before any purchases or sales have occurred.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been subtracted from total revenue.

Consignment

A sales arrangement in which goods are placed in the care of another, but ownership and title remain with the supplier until the goods are sold.

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