Hot Rocks Corporation Estimates That It Can Save $2800 a Year

question 22

Multiple Choice

Hot Rocks Corporation estimates that it can save $2800 a year in cash operating costs for the next ten years if it buys a special purpose machine at a cost of $11 000. No residual value is expected. The firm's minimum desired rate of return is 12%. Compute the net present value.

• A) $6289.66
• B) $4314.00
• C) $2850.29
• D) $4820.56

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Definitions:

Market Demand

The total quantity of a good or service that all consumers in a market are willing and able to buy at various prices.

Competitive Price-Searcher

A market condition where firms continually search for the best prices to maximize their profits in a competitive environment.

Economic Efficiency

The optimization of resources to best fulfill the needs and wants of individuals and society with the least waste.

Government Regulations

Rules set by government bodies to control or guide specific activities within the economy or society.