Pauline's Products Inc

question 70

Multiple Choice

Pauline's Products Inc. is considering investing in a new piece of equipment that costs $75,000. The equipment is expected to generate revenues of $25,000 per year for five years. The equipment would be depreciated using the straight-line method over its five year life and have a salvage value of $8,000. 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 12 percent on its investment. The net present value of the equipment is:

• A) $7,042.
• B) $(13,472).
• C) $21,248.
• D) $5,453.

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Definitions:

Networking Potential

The capacity or ability of an individual or organization to develop and utilize relationships for professional or business advantage.

Core Business Potential

The inherent capabilities or opportunities within a company's primary business areas that can be optimized for growth and profitability.

Learning Potential

The capability of individuals or organizations to acquire, apply, and adapt knowledge and skills in various contexts for improvement.