Ursula Company Is Considering the Purchase of a New Machine

question 5

Multiple Choice

Ursula Company is considering the purchase of a new machine for $160,000. The machine would generate an annual cash flow before depreciation and taxes of $62,588 for four years. At the end of four years, the machine would have no salvage value. The company's cost of capital is 12 percent. The company uses straight-line depreciation with no mid-year convention and has a 40 percent tax rate. What is the internal rate of return for the machine rounded to the nearest percent?

• A)below 12%
• B)between 16 and 18%
• C)between 14 and 16%
• D)between 12 and 14%

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Definitions:

Relative Deprivation

The feeling of dissatisfaction or injustice from comparing oneself unfavorably to others in terms of resources, status, or achievements.

Personal Happiness

An emotional state characterized by feelings of joy, satisfaction, contentment, and fulfillment.

Others' Attainments

The achievements or accomplishments of other people that might serve as standards or goals for an individual.

Facial Feedback Effect

The hypothesis that facial movement can influence emotional experience. For example, smiling can make you feel happier.