Colors and More Is Considering Replacing the Equipment It Uses

question 93

Multiple Choice

Colors and More is considering replacing the equipment it uses to produce crayons.The equipment would cost $1.37 million,have a 12-year life,and lower manufacturing costs by an estimated $310,000 a year.The equipment will be depreciated using straight-line depreciation to a book value of zero.The required rate of return is 15 percent and the tax rate is 35 percent.What is the net income from this proposed project?

• A)$18,508.75
• B)$40,211.24
• C)$66,441.67
• D)$127,291.67
• E)$136,709.48

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Definitions:

Filtration

A process that separates solids from liquids or gases using a filter medium that only allows the fluid to pass through.

Reabsorption

The process by which substances are taken back into the bloodstream from the fluids in the kidneys.

Malpighian Tubules

Excretory structures in insects and some other arthropods that remove wastes from the body and help in osmoregulation.

Hemolymph

Fluid that circulates in an open circulatory system.