(Ignore Income Taxes in This Problem

question 120

Multiple Choice

(Ignore income taxes in this problem.) Gillaspie, Inc., is considering the purchase of a machine that would cost $300,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $51,000. The machine would reduce labor and other costs by $86,000 per year. Additional working capital of $10,000 would be needed immediately. All of this working capital would be recovered at the end of the life of the machine. The company requires a minimum pretax return of 13% on all investment projects.
-The net present value of the proposed project is closest to:

• A)$30,155
• B)$47,139
• C)$2,462
• D)$25,585

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Definitions:

Fully Executed Contract

A legally binding agreement that has been fully enacted, with all its terms met by all parties involved.

Labelling Theory

The assertion that once labelled as deviant, people come to accept the label as part of their identity.

Deviant

Behavior that violates the norms, values, or expectations of a group or society, which can provoke negative or positive reactions from others.

Murder

The unlawful premeditated killing of one human being by another.