A company is considering investing in one of two machines: one new and one it already has been using.

A company is considering investing in one of two machines: one new and one it already has been using. If the old machine, required three years ago, has four years of remaining life, what is the present value of the tax savings generated by straight line depreciation over the remaining life. The original cost of the machine was $224,000. The cost of capital is 12% and the tax rate=40%.

a) $12,800

b) 38,874

c) 56,000

d) 68,029

A payoff table, based on net profits, used to make a decision involving variable demand considers which kind of loss?

a) loss of future profits

b) loss from understock costs

c) loss from obsolete items

d) opportunity losses