(Ignore Income Taxes in This Problem

question 85

Multiple Choice

(Ignore income taxes in this problem.) The management of Gimenez Corporation is investigating an investment in equipment that would have a useful life of 7 years. The company uses a discount rate of 17% in its capital budgeting. Good estimates are available for the initial investment and the annual cash operating outflows, but not for the annual cash inflows and the salvage value of the equipment. The net present value of the initial investment and the annual cash outflows is -$274,265.
-Ignoring the cash inflows,to the nearest whole dollar how large would the salvage value of the equipment have to be to make the investment in the equipment financially attractive?

• A)$274,265
• B)$46,625
• C)$1,613,324
• D)$823,619

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Definitions:

Problem Solving

The process of identifying a challenge and developing strategies to address it effectively.

Source of Conflict

Source of conflict refers to the underlying reasons or issues that lead to a disagreement or clash between individuals, groups, or organizations.

Cultural Tendency

Patterns or traits that are common within a specific culture, influencing behaviors, attitudes, and practices of its individuals or groups.

Win-Lose Relationships

A type of interaction where one party's gain is perceived to be at the expense of another's loss, often resulting in competition rather than cooperation.