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34. Poe Company is considering the purchase of new equipment costing $81,000. The projected net cash flows are $36,000 for the first two years and

34.

Poe Company is considering the purchase of new equipment costing $81,000. The projected net cash flows are $36,000 for the first two years and $31,000 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 Valueof 1 at 10% Present Value of anAnnuity of 1 at 10%
1 0.9091 0.9091
2 0.8264 1.7355
3 0.7513 2.4869
4 0.6830 3.1699

$(17,901).

$(6,707).

$17,901.

$6,707.

$25,944.

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