Answer the Following Questions Using the Information Below

question 13

Multiple Choice

Answer the following questions using the information below:
Difend 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 now, it may be sold for $100,000. The new machine will cost $350,000 and an additional cash investment in working capital of $100,000 will be required. The new machine will reduce the average amount of time required to wash clothing and will decrease labor costs. The investment is expected to net $110,000 in additional cash inflows during the first year of acquisition and $250,000 each additional year of use. The new machine has a three-year life, and zero disposal value. 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. 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) $144,240 ; yes
• B) $180,000 ; yes
• C) $(180,000); no
• D) $(144,240); no

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Definitions:

James Forten

A prominent African American abolitionist and wealthy businessman in Philadelphia during the 18th and 19th centuries.

British Attack

Refers to various military actions conducted by British forces, particularly during the Revolutionary War and War of 1812 against the United States.

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Individuals of African descent who hold citizenship in a given country, often used in contexts discussing their rights, contributions, and challenges within that country.

Freedom's Journal

The first African-American owned and operated newspaper published in the United States, founded in 1827.