Use the following to answer questions
Memphis Co. is going to purchase a machine for $83,200 that will increase cash flows by $40,000 in the first year, $30,000 the second year, and $25,000 the third year. The machine will have no residual value. The minimum rate of return is 10 percent. The present value factors for the three years are 0.909, 0.826, and 0.751, respectively.
. The machine’s actual rate of return is
A) greater than 10 percent.
B) less than 10 percent.
C) 10 percent.
D) Unable to determine from the data given
. The machine’s net present value is
A) ($4,286).
B) $79,915.
C) $21,800.
D) ($3,285).
. Estimated future costs that differ between alternative courses of action are termed costs in management decision analysis.
A) relevant
B) absorption
C) replacement
D) variable overhead
