Peng Corporation Is Considering the Purchase of New Equipment Costing

question 14

Multiple Choice

Peng Corporation is considering the purchase of new equipment costing $30,000.The projected annual after-tax net income from the equipment is $1,200,after deducting $10,000 for depreciation.The revenue is to be received at the end of each year.The machine has a useful life of four years and no salvage value.Peng requires a 12% return on its investments.The factors for the present value of $1 for different periods follow:
$$\begin{array} { l r } \underline{\text { Periods }} & \underline{12 \text { Percent }} \\1 & 0.8929 \\2 & 0.7972 \\3 & 0.7118 \\4 & 0.6355\end{array}$$
Calculate the break-even time for this equipment.

• A) Break-even time is longer than four years.
• B) Break-even time is between three and four years.
• C) Break-even time is between two and three years.
• D) Break-even time is between one and two years.
• E) This project will never break even.

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Definitions:

Public Goods

Goods that are non-excludable and non-rivalrous, meaning they can be consumed by many people at once without depleting the supply.

Paired-Choice Voting

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Society's Preferences

The collective desires, priorities, and tastes of a community or society, influencing consumption and production.

Paradox of Voting

A situation in which the cost of voting (time, effort) appears to outweigh the individual benefits, making it rational for people not to vote, yet people still vote.