Question
A company is considering the purchase of new equipment for $54,000. The projected annual net cash flows are $21,600. The machine has a useful life
A company is considering the purchase of new equipment for $54,000. The projected annual net cash flows are $21,600. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 9% return on investment. The present value of an annuity of 1 for various periods follows:
| Periods | Present value of an annuity of $1 at 9% | ||
| 1 | 0.9174 | ||
| 2 | 1.7591 | ||
| 3 | 2.5313 | ||
What is the net present value of this machine assuming all cash flows occur at year-end?
$3,300 $21,600 $676 $54,676
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Cost Accounting A Managerial Emphasis
Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav
14th Edition
978-0132960649, 132960648, 132109174, 978-0132109178
