Thomson Media Is Considering Some New Equipment Whose Data Are

question 8

Multiple Choice

Thomson Media is considering some new equipment whose data are shown below.The equipment has a 3-year tax life and would be fully depreciated by the straight-line method over 3 years,but it would have a positive pre-tax salvage value at the end of Year 3,when the project would be closed down.Also,additional net operating working capital would be required,but it would be recovered at the end of the project's life.Revenues and other operating costs are expected to be constant over the project's 3-year life.What is the project's NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number.

• A) $26,238
• B) $026,500
• C) $020,728
• D) $021,777
• E) $028,861

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Definitions:

Merchandising Companies

Companies that purchase goods in a finished condition and resell them at a profit without further processing.

Operating Cycles

Operating cycles refer to the average period of time it takes for a business to convert its inventory to sales revenue and then to cash.

Profit Margins

A financial metric measuring the amount of net income generated as a percentage of revenue, reflecting the profitability of a business.

Perpetual Inventory System

A method of maintaining inventory records where updates are made continuously after each purchase or sale.