ABC Service Can Purchase a New Assembler for $15,052 That

question 26

Multiple Choice

ABC Service can purchase a new assembler for $15,052 that will provide an annual net cash flow of $6,000 per year for five years. Calculate the NPV of the assembler if the required rate of return is 12%. (Round your answer to the nearest $1.)

• A) $1,056
• B) $4,568
• C) $7,621
• D) $6,577

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Definitions:

Obligations

Financial or legal responsibilities, such as debts or contractual agreements, that an entity is required to fulfill.

Deposit Method

An accounting method used for recognizing revenue and expenses related to long-term contracts where the earnings process is incomplete.

Revenue Recognition

The accounting principle that outlines the specific conditions under which revenue is recognized or recorded.

Initial Direct Costs

Upfront expenditures that are directly associated with securing a contract or lease, such as legal and brokerage fees.