Charlotte Computer Services Is Considering Purchasing Equipment at $100 000

question 122

Multiple Choice

Charlotte Computer Services is considering purchasing equipment at $100 000. It is anticipated the equipment will have a useful life of five years. It will be depreciated on a straight-line basis. Operating revenue is expected to be $74 000 per annum and operating expenses $25 000 per annum. The equipment is subject to an investment allowance of 10 per cent and the tax rate is 30 per cent. The after-tax hurdle rate is 12 per cent. What is the net present value of the investment?

• A) $45 282
• B) $7545
• C) $70 825
• D) $48 282

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Definitions:

Strategy

A plan of action designed to achieve a long-term or overall aim.

Nash Equilibrium

The point in a game where each player's strategy is optimal given the strategies of all other players, with no incentive to deviate.

Simultaneous Move Game

A type of strategic game in which all players make their decisions at the same time, without knowledge of the other players' choices.

Bargain Hard

Bargain hard refers to the act of negotiating with determination and strategy to achieve the most advantageous terms possible in a deal or transaction.