Cubbies Pty Ltd Is Considering the Purchase of a New

question 114

Multiple Choice

Cubbies Pty Ltd is considering the purchase of a new machine to replace an old machine. Selected cost data pertaining to the two machines is provided below.
At the end of four years, the company plans to discontinue the product line for which the machines are used. Income taxes can be ignored. Calculate the net present value of the new machine, if Cubbies Pty Ltd's hurdle rate is 14 per cent.

• A) 1.6%.
• B) 3.9%.
• C) 21.6%.
• D) 22.2%.