A Company Bought a Machine That Has an Expected Life

question 28

Multiple Choice

A company bought a machine that has an expected life of 7 years and no salvage value. Management estimates that this machine will generate annual after-tax net income of $540. If the accounting rate of return is 12%, what was the purchase price of the machine?

• A) $4,500
• B) $540
• C) $31,500
• D) $9,000
• E) $2,250

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Definitions:

LSD

Lysergic Acid Diethylamide, a powerful psychoactive drug that induces altered states of awareness, perceptions, and feelings.

Hypnosis

A trancelike state of focus and concentration characterized by heightened suggestibility, relaxation, and imagination.

Cerebral Cortex

The outer layer of the brain, involved in higher-level processes such as consciousness, thought, emotion, reasoning, language, and memory.

Relaxed Waking State

A state of consciousness characterized by reduced physical and mental tension while being fully awake and alert.