Baker Corporation Is Considering Buying a New Donut Maker

question 98

Multiple Choice

Baker Corporation is considering buying a new donut maker. This machine will replace an old donut maker that still has a useful life of 4 years. The new machine will cost $3,500 a year to operate, as opposed to the old machine, which costs $3,900 per year to operate. Also, because of increased capacity, an additional 10,000 donuts a year can be produced. The company makes a contribution margin of $0.15 per donut. The old machine can be sold for $6,000 and the new machine costs $28,000. The incremental annual net cash inflows provided by the new machine would be:

• A)$1,500
• B)$400
• C)$1,900
• D)$7,000

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Definitions:

Truth Values

The attribute of a statement that denotes it as true, false, or in some systems, indeterminate.

Truth Table

A chart employed in logic to ascertain if a proposition is valid by cataloging every conceivable situation and their respective truth or falsity.

Atomic Sentences

Simple sentences that cannot be broken down into smaller parts while maintaining meaning.

Truth Values

The valuation in logic that shows the relation of a statement to the truth, typically classified as either true or false.