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

question 14

Multiple Choice

Use the information below to answer the following question(s) .
Neptune Ltd. wants to expand its operations by manufacturing a new product line. New equipment will cost $225,000. Incremental sales are estimated at $150,000 per year for 6 years. Variable costs of producing the new product line are 52% of sales and incremental annual fixed costs are $25,000. The equipment can be salvaged after 6 years for 16% of its original cost. The company's required rate of return for new projects is 18%. Ignore income taxes.
-What is the net present value of the Neptune Ltd. investment?

• A) ($26,291)
• B) ($47,277)
• C) ($60,613)
• D) $93,000

Comprehend the differences and applications of discounted cash flow (DCF) analysis versus accrual accounting in evaluating capital investments.

Recognize the critical factors that influence capital expenditure decisions, including market conditions, competitor reactions, and economic trends.

Understand the tax implications of asset disposal and how depreciation methods affect tax calculations.

Identify the limitations of the payback method and how it ranks investment proposals.

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Definitions:

Personality

The mix of emotional, attitudinal, and behavioral reaction patterns characteristic of a person.

Unconscious

The part of the mind that is inaccessible to the conscious mind but that affects behavior and emotions.

Neurotic

Related to, constituting, or affected by a mild mental disorder characterized by anxiety or fear.

Dominant Force

The most powerful or influential factor in a particular situation or relationship.