A Company Can Buy a Machine That Is Expected to Have

question 144

Essay

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%?

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Definitions:

Psychological Contract

The unwritten expectations and assumptions between employees and employers regarding the nature of their work relationship.

Contributions

The act of giving or adding to something larger, such as ideas, work, or resources, to achieve a common goal.

Inducements

Incentives or rewards offered to motivate specific actions or behaviors from individuals or groups.

Self-serving Bias

A cognitive bias where individuals attribute positive outcomes to their own actions and negative outcomes to external factors.