Question
Butler Corporation is considering the purchase of new equipment costing $48,000. The projected annual income from the equipment is $1,800, after deducting $16,000 for depreciation.
Butler Corporation is considering the purchase of new equipment costing $48,000. The projected annual income from the equipment is $1,800, after deducting $16,000 for depreciation. The revenue is to be received at the end of each year. The machine has a useful life of 3 years and no salvage value. Butler requires a 11% return on its investments. The present value of an annuity of $1 for different periods follows:
| Periods | 11% |
|---|---|
| 1 | 0.9009 |
| 2 | 1.7125 |
| 3 | 2.4437 |
| 4 | 3.1024 |
What is the net present value of the machine (rounded to the nearest whole dollar)?
Multiple Choice
A. $39,099.
B. $(4,502).
C. $48,000.
D. $43,498.
E. $1,800.
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Fundamental financial accounting concepts
Authors: Thomas P. Edmonds, Frances M. Mcnair, Philip R. Olds, Edward
8th edition
978-007802536, 9780077648831, 0078025362, 77648838, 978-0078025365
