The Management of Trylon Farms Is Considering the Purchase of Equipment

question 37

Multiple Choice

The management of Trylon Farms is considering the purchase of equipment costing $320,000.The equipment has a useful life of eight years,with $20,000 residual value.The use of this equipment will produce positive annual cash flow of $60,000 for eight years,as well as $20,000 from sale of the equipment at the end of the eighth year.Compute the net present value of this investment,discounted at an annual rate of 10%.(Present value of $1 due in eight years,discounted at 10%,is 0.467;present value of $1 received annually for eight years,discounted at 10% is 5.335. )

• A)$9,340
• B)$320,100
• C)$9,440
• D)$329,440

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Definitions:

Salaries

Payments made to employees for their services, typically expressed as an annual sum and paid at regular intervals.

Investing Activities

Financial activities related to the purchase and sale of long-term assets or investment securities, impacting a company's cash flow.

Financing Activities

Transactions involving raising capital and repaying investors, including debt, equity, and dividend payments as part of a company's cash flow.

Operations

Activities involved in the day-to-day running of a business for the purpose of producing value for the stakeholders; involves management of resources, production, and distribution of goods and services.