Use the information below to answer the following question(s).Hawkeye Cleaners has been considering the purchase of an industrial dry-cleaning machine.The existing machine is operable for three more years and will have a zero disposal price.If the machine is disposed of now, it may be sold for $30,000.The new machine will cost $200,000, an additional cash investment in working capital of $60,000 will be required and will be returned at the end of the project.The machine is expected to last 3 years and has an estimated disposal value at that time of $20,000.The new machine will reduce the average amount of time required to wash clothing and will decrease labour costs.The investment is expected to net $50,000 in additional cash inflows during the year of acquisition and $150,000 each additional year of use.These cash flows will generally occur throughout the year and are recognized at the end of each year.Income taxes are not considered in this problem.
-Which of the following results of net present value analyses is the LEAST acceptable?
A)$(15,000)
B)$(1,000)
C)$12,000
D)$0
E)$20,000

Question

Quizplus · Accepted Answer

The least acceptable result of net present value analysis would be a negative net present value. This means that the project is not expected to generate a positive return and would not be worth pursuing. Choices B, C, D, and E all have positive net present values, indicating that the project would generate a positive return. However, choice A has a negative net present value of $(15,000), making it the least acceptable option.

Use the Information Below to Answer the Following Question(s)