Use the Information Below to Answer the Following Question(s)

question 48

Multiple Choice

Use the information below to answer the following question(s) .Hawkeye Cleaners has been 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.If the machine is disposed of now, it may be sold for $30,000.The new machine will cost $200,000, an additional cash investment in working capital of $60,000 will be required and will be returned at the end of the project.The machine is expected to last 3 years and has an estimated disposal value at that time of $20,000.The new machine will reduce the average amount of time required to wash clothing and will decrease labour costs.The investment is expected to net $50,000 in additional cash inflows during the year of acquisition and $150,000 each additional year of use.These cash flows will generally occur throughout the year and are recognized at the end of each year.Income taxes are not considered in this problem.
-Investment A requires a net investment of $600,000.The required rate of return is 10 percent for the three-year annuity.What are the annual cash inflows if the net present value equals 0?

• A)$184,842
• B)$241,269
• C)$249,791
• D)$271,316
• E)$360,000

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Definitions:

Forewarning

The act of informing someone in advance of a potential danger or negative outcome, allowing for preparation or avoidance.

Legitimate Power

Authority that is accepted as a normal part of a social role.

Referent Power

Social influence that occurs because individuals seek to be liked and accepted by valued social groups.

Emotional Appeal

A persuasive technique that targets the emotions rather than logic or reason to influence an audience’s response or behavior.