Forge Company Wants to Purchase a New Cutting Machine for Its

question 7

Multiple Choice

Forge Company wants to purchase a new cutting machine for its sewing plant.The investment is expected to generate annual cash inflows of $120,000.The required rate of return is 10% and the current machine is expected to last for four years.What is the maximum dollar amount the company would be willing to spend for the machine,assuming its life is also four years? Income taxes are not considered.

• A) $273,500
• B) $460,800
• C) $355,950
• D) $380,280

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Definitions:

Psychological Test

A standardized measure of a sample of behavior used to assess psychological constructs such as cognitive abilities, personality traits, or emotional states.

Consistency

The quality of always behaving or performing in a similar way, or of always producing the same results.

Validity

The extent to which a test or instrument measures what it claims to measure.

Core Concepts

Fundamental ideas or principles that are the building blocks in any field of study or knowledge.