Abco Pty Ltd Is Considering the Purchase of $60 000

question 60

Multiple Choice

Abco Pty Ltd is considering the purchase of $60 000 in tools. The manager estimates that the tools will generate $25 000 in savings during each year of a four-year life. The tools will be depreciated based on the following schedule.
The expected tax rate is 30 per cent. What is the net present value of the investment, assuming an after-tax hurdle rate of 14 per cent?

• A) $5001
• B) ($9005)
• C) $23 700
• D) ($1720)

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Definitions:

Operating Variables

Factors that can be adjusted or varied during the operation of a machine, system, or process, affecting its performance or outcome.

Fast Adaptive Mode

High-speed processing algorithms; Allison uses this term to describe an operating condition in which large changes are made to initial shift conditions to adjust for major system tolerances such as solenoid-to-solenoid, main pressure, and clutch-to-clutch variations. A new or newly rebuilt transmission should be programmed to operate in fast adaptive mode.

Close-ratio Gearing

A transmission design where the gear ratios are closer together, allowing the engine to operate more consistently near its optimal RPM for performance.

Standard Gear Ratios

The predefined set of gear ratios used in transmissions to optimize vehicle performance and fuel efficiency under normal driving conditions.