A company is considering the purchase of new equipment for $81,000. The projected annual net cash flows are $32,200. 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:

Period 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?

Multiple Choice

$27,000

$4,200

$508

$31,200

$78,977