Jolly Corporation Is Considering an Investment in Equipment for $25,000

question 33

Multiple Choice

Jolly Corporation is considering an investment in equipment for $25,000.Data related to the investment are as follows: Jolly uses the straight-line method of depreciation with no mid-year convention.In addition, its tax rate is 40 percent, and the life of the equipment is four years with no salvage value.Cost of capital is 12 percent.
What is the net present value of the investment?

• A) $30,370
• B) $(2,222)
• C) $12,962
• D) $5,370

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Definitions:

Due Date

The due date is a specific date by which an obligation, such as a payment or task, must be completed.

Note Payable

A written promise to pay a specified amount of money, usually with interest, by a certain date.

Sale of Equipment

A financial transaction involving the disposal of equipment assets in exchange for cash or other compensation.