A Company Can Buy a Machine That Is Expected to Have

question 50

Multiple Choice

A company can buy a machine that is expected to have a three-year life and a $30,000 salvage value. The machine will cost $1,800,000 and is expected to produce a $200,000 after-tax net income to be received at the end of each year. If a table of present values of 1 at 12% shows values of 0.8929 for one year, 0.7972 for two years, and 0.7118 for three years, what is the net present value of the cash flows from the investment, discounted at 12%?

• A) $118,855
• B) $583,676
• C) $629,788
• D) $705,391
• E) $1,918,855

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Definitions:

Research Hypotheses

Formal statements predicting a significant relationship or difference between two or more variables in a study.

Analysis of Variance

A statistical technique that compares the averages of three or more groups to determine if at least one significantly deviates from the rest.

ANOVA

Short for "Analysis of Variance," a statistical method used to compare the means of three or more samples, testing the hypothesis that they are equal.

Total Sample Size

The aggregate number of individual observations or data points collected in a study.