Question
Cerritos Farms is considering a purchase of a tractor that costs $156,750. This tractor will generate annual net cash inflows of $32,500 for five years.
Cerritos Farms is considering a purchase of a tractor that costs $156,750. This tractor will generate annual net cash inflows of $32,500 for five years. The cost of capital is 8%. Present value factor of cash inflows for 6 years is 4.623. What is the net present value of the investment and should the company accept the investment?
Group of answer choices
$38,250; Investment should be accepted.
$(6,502); Investment should NOT be accepted.
$(3,060); Investment should NOT be accepted.
$12,020; Investment should be accepted.
$19,960; Investment should be accepted.
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