A Local Day Spa Is Considering Investing in a Machine

question 33

Multiple Choice

A local day spa is considering investing in a machine that costs $60,000. The machine is expected to generate revenues of $25,000 per year for five years. The machine would be depreciated using the straight-line method with no half-year convention over its five year life and have no salvage value. The company considers the impact of income taxes in all of its capital investment decisions. The company has a 35 percent income tax rate and desires an after-tax rate of return of 14 percent on its investment. The net present value of the machine is:

• A) $36,985.
• B) $10,207.
• C) $25,828.
• D) $22,566.

---

Definitions:

Gestures

Physical movements or signals used to convey messages or express thoughts without verbal communication.

Nonverbal Messages

Communication expressed through body language, facial expressions, gestures, and other non-linguistic means.

Verbal Messages

Messages that use words to create meaning.

Superior

Refers to someone who holds a higher position or rank, often used to describe someone in the organizational hierarchy above oneself.