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:

Anterior-Root Ganglion

A cluster of nerve cell bodies (neurons) located in the anterior root of the spinal cord, involved in transmitting sensory information from the peripheral to the central nervous system.

Periaqueductal Gray Matter

A region of the midbrain involved in modulating pain perception and in coordinating fight or flight responses.

Semicircular Canals

Three looped tubes in the inner ear that are filled with fluid and help with maintaining balance by detecting head rotation.

Action Potentials

Brief electrical impulses that serve as the fundamental signals by which information is transmitted along nerve cells.