(Ignore Income Taxes in This Problem

question 46

Multiple Choice

(Ignore income taxes in this problem.) The management of Mashiah Corporation is considering the purchase of a machine that would cost $290,000, would last for 6 years, and would have no salvage value. The machine would reduce labor and other costs by $102,000 per year. The company requires a minimum pretax return of 13% on all investment projects.
-The present value of the annual cost savings of $102,000 is closest to:

• A)$849,012
• B)$612,000
• C)$195,872
• D)$407,796

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Definitions:

Marginal External Benefit

Increased benefit that accrues to other parties as a firm increases output by one unit.

Pollution Emissions

The release of pollutants into the environment, typically referring to harmful substances discharged from industries, vehicles, and other sources.

Marginal External Cost

The cost resulting from producing one additional unit of a good that is incurred by someone other than the producer.

Fixed Proportions Technology

Fixed proportions technology is a production process where inputs must be used in strict, fixed ratios to produce outputs, with no possibility of substitution between inputs.