The Management of Nebraska Corporation Is Considering the Purchase of a New

question 64

Multiple Choice

The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation: The average rate of return for this investment is:

• A) 18%
• B) 16%
• C) 58%
• D) 10%

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Definitions:

Gross Profit

The financial performance metric that subtracts the cost of goods sold from total sales revenue.

Net Sales

The amount of revenue generated by a company after deducting returns, allowances for damaged or missing goods, and any discounts allowed.

Cost of Goods Sold

The specific expenses directly tied to the manufacturing of products sold by a business, such as costs for materials and labor.

Percentage

A fraction or ratio expressed as a part of one hundred, used to describe proportions or compare values.