Question
1. A company is considering the purchase of new equipment costing $91,000. The machine has a useful life of four years and no salvage value.
1. A company is considering the purchase of new equipment costing $91,000. The machine has a useful life of four years and no salvage value. The company requires a 12% return on its investments. The factors for the present value of an annuity of 1 for different periods follow:
Assuming all revenue is to be received at the end of each year, what are the net cash flows for this investment if net present value equals ($11,790)?
A. $78,210 B. $10,920 C. $25,750 D. $237,547 E. $33,513
2. Scott Corporation is considering the purchase of new equipment costing $30,000. The projected annual after-tax net income from the equipment is $1,200, after deducting $10,000 for depreciation. The revenue is to be received at the end of each year. The machine has a useful life of three years and a $4,000 salvage value. Scott requires a 12% return on its investments. The factors for the present value of $1 for different periods follow:
What is the net present value of the machine and what is the maximum Scott would have been willing to pay for it?
$(251.52) but Scott would not pay any amount to acquire the machine because the NPV is negative.
$(251.52) and Scott would be willing to pay $29,748.48 for the machine.
$(251.52) but the price Scott would pay cannot be determined.
$900 and Scott would be willing to pay $30,900 to acquire the machine.
$900 but Scott would not be willing to acquire the machine.
Explain Answers if you can :)
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