The Manager of Malan Pty Ltd Wants to Buy a New

question 48

Multiple Choice

The manager of Malan Pty Ltd wants to buy a new machine to replace the one currently being used. The new machine will cost $100 000 with no disposal value at the end of a five-year useful life. The manager estimates that the machine will reduce annual operating costs by $30 000. Depreciation will be $20 000 per year for five years. The tax rate for each year is expected to be 20 per cent and the company has an after-tax hurdle rate of 12 per cent. What is the after-tax net present value of the machine?

• A) $100 940
• B) $8150
• C) $940
• D) ($13 480)

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Definitions:

Root Hair

An extension, or outgrowth, of a root epidermal cell. Root hairs increase the absorptive capacity of roots.

Endodermal Cell

An endodermal cell is a type of cell originating from the innermost layer of the early embryo, contributing to the formation of the lining of the digestive and respiratory systems.

Stele

The cylinder in the center of roots and stems that contains the vascular tissue; also called vascular cylinder.

Pericycle

A layer of cells found just inside the endodermis in plant roots, involved in the formation of lateral roots and secondary growth.