Carlson Manufacturing Has Some Equipment That Needs to Be Rebuilt

question 102

Multiple Choice

Carlson Manufacturing has some equipment that needs to be rebuilt or replaced.The following information has been gathered relative to this decision: Carlson uses the total cost approach to net present value analysis and a discount rate of 12%.Regardless of which option is chosen,rebuild or replace,at the end of five years Carlson Manufacturing will have no future use for the equipment. If the new equipment is purchased,the present value of the cash flows that occur now is:

• A)($48,000)
• B)($39,000)
• C)($41,000)
• D)($37,000)

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Definitions:

Government Caps

Maximum limits set by the government on prices, wages, or other economic variables to control the economy.

Total Cost

The total of all expenses involved in creating goods or services, encompassing both constant and changing costs.

Carbon Taxes

Economic policies designed to reduce carbon emissions by taxing companies or individuals based on their greenhouse gas emissions.

Social Cost

The total cost to society, including both the private costs incurred by firms and also any additional costs to others.