Warchester Inc

question 62

Multiple Choice

Warchester Inc. is considering the purchase of a 3-D printer that will require an initial investment of $15,000. The printer will produce parts at a net savings of $4,000 per year in operating costs. The company will use a discount rate of 8.5%. What is the NPV of this equipment to the nearest dollar?

• A) $5,000
• B) $15,703
• C) $703
• D) $763

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Definitions:

Safety Reserves

Financial or physical assets kept on hand as a precautionary measure to cover unexpected expenses or emergencies.

Shortage Cost

The cost incurred from the inability to satisfy demand for a product or service due to insufficient resources or supply.

Carrying Costs

The total cost of holding inventory, including storage, insurance, depreciation, and opportunity costs.

Storage Costs

Expenses incurred for storing goods, which may include warehousing, refrigeration, insurance, and security expenses.