A company is considering the purchase of new equipment costing $ 25,000. The projected annual net cash
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Question:
A company is considering the purchase of new equipment costing $ 25,000. The projected annual net cash flows per year are: year 1 - $ 4,500; year 2 - $ 4,100; year 3 - $ 3,900. The machine has a useful life of 3 years and no salvage value. The company requires a 10% return on its investments. The relevant present value factors for 10% are listed below.
Period | PV of 1 (10%) | PV of Annuity of 1 (10%) |
1 | 0.9091 | 0.9091 |
2 | 0.8264 | 1.7355 |
3 | 0.7513 | 2.4869 |
4 | 0.6830 | 3.1699 |
What is the present value of the machine?
Multiple Choice
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$ 9,391.
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$ 10,409.
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$ 12,856.
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$ 20,905.
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$ 31,086.
Related Book For
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
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