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:

Worthless Today

Describes assets or investments that have lost all monetary value in the current period.

Significant Liability

Substantial financial obligations or debts that a company or individual has, which can impact financial health.

Credit Cards

Financial tools issued by banks allowing cardholders to borrow funds within a pre-approved limit for purchases or cash advances, typically requiring repayment with interest.

Mortgages

Loans secured by real property, typically used by individuals or businesses to purchase homes or real estate.