Salomone Inc

question 14

Essay

Salomone Inc.has provided the following data concerning a proposed investment project:
The company's tax rate is 30%.For tax purposes,the entire initial investment without any reduction for salvage value will be depreciated over 3 years.The company uses a discount rate of 13%.
Required:
Compute the net present value of the project.
$\begin{array}{lr}\text { Initial investment............. } & \$ 693,000 \\\text { Annual cash receipts ......... } & \$ 554,000 \\\text { Life of the project........... } & 5\text { years } \\\text { Annual cash expenses ........ } & \$249,000 \\\text { Salvage value ................ } & \$ 69,000 \\\end{array}$

---

Definitions:

Self-fulfilling Prophecy

A belief or expectation that an individual or group holds about a future event that manifests because the individual or group acts in ways that support the belief or expectation.

Theory X

A management assumption that employees are inherently lazy, require close supervision and control, and are motivated primarily by financial incentives.

Theory Y

A management approach based on the belief that employees are intrinsically motivated and will seek out responsibility and development if given the opportunity.

Self-fulfilling Prophecies

Situations where an initially false expectation leads to its own confirmation because the expectation influences behavior to make it true.