A company has the choice of either selling 1,900 defective units as scrap or rebuilding them. The company could sell the defective units as they are for $17.00 per unit. Alternatively, it could rebuild them with incremental costs of $6.00 per unit for materials, $12.00 per unit for labor, and $12.00 per unit for overhead, and then sell the rebuilt units for $20.00 each. If the company rebuilds the units, rather than selling them as scrap, what is the incremental impact on income?

Multiple Choice

Income will increase by $32,300.

Income will increase by $51,300.

Income will decrease by $83,600.

Income will decrease by $51,300.

Income will increase by $38,000.

Poe Company is considering the purchase of new equipment costing $88,500. The projected net cash flows are $43,500 for the first two years and $38,500 for years three and four. The revenue is to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Poe requires a 10% return on its investments. The present value of an annuity of $1 and present value of an annuity for different periods is presented below. Compute the net present value of the machine.

Periods	Present value of $1 at 10%	Present value of an Annuity of $1 at 10%
1	0.9091	0.9091
2	0.8264	1.7355
3	0.7513	2.4869
4	0.6830	3.1699

Multiple Choice

$(34,175).

$(20,290).

$34,175.

$20,290.

$42,218.