2D1B MINTZ CORPORATION IS CONSIDERING THE ACQUISITION OF A NEW TECHNO...

296.

CSO: 2D1b

LOS: 2D1b

Mintz Corporation is considering the acquisition of a new technologically efficient

packaging machine at a cost of $300,000. The equipment requires an immediate, fully

recoverable, investment in working capital of $40,000. Mintz plans to use the machine

for five years, is subject to a 40% income tax rate, and uses a 12% hurdle rate when

analyzing capital investments. The company employs the net present value method

(NPV) to analyze projects.

The overall impact of the working capital investment on Mintz’s NPV analysis is

a.

$(10,392).

b.

$(13,040).

c.

$(17,320).

d.

$(40,000).