Arnold Company Is Acquiring a New Machine with a Life

question 12

Multiple Choice

Arnold Company is acquiring a new machine with a life of 5 years for use on its production line. The following data relate to this purchase: Cost of new machine $100,000
Annual cost savings in cash expenses 45,000
Terminal value 8,000
Maintenance required in the 4th year 5,000
Book value of the old machine 20,000
The new machine would replace an old fully-amortized machine. The old machine can be sold for $15,000 at the time the new equipment is acquired. The income tax rate is 30%, and the discount rate is 12%. Arnold uses the straight-line method for amortization on all machines (ignore the half-year convention) . Note: some amounts are rounded.
The present value of the cash flows for year 4 is:

• A)$21,319
• B)$28,951
• C)$23,545
• D)$21,624

Recognize the impact of diet and nutrition on neurotransmitter levels and their subsequent effect on mood and behavior.

Understand the difference between economic profit and accounting profit.

Grasp the concept of sunk costs and their impact on business decisions.

Understand the principles behind the Third Industrial Revolution and its potential effects on production and transportation costs.

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Definitions:

Epigenetic Marks

Chemical modifications to the DNA or histone proteins that affect gene expression without altering the underlying DNA sequence.

Second Darwinian Revolution

A period of extended scientific research and discussion that further explores and builds upon Charles Darwin's theory of natural selection.

Nearsightedness

A common vision condition in which close objects appear clearly, but distant ones do not, also known as myopia.

Mutation

A random error in gene replication that leads to a change.