Question
Crane Enterprises is considering investing in a new packing machine. The new machine will provide annual cash operating inflows of $10086 for 5 years. The
Crane Enterprises is considering investing in a new packing machine. The new machine will provide annual cash operating inflows of $10086 for 5 years. The cost of the machine is $34686 and it can be sold at the end of its 5-year useful life for $5576.Crane's required rate of return is 10%.
| Type of cash flow | Periods | Interest rate | Factor |
|---|---|---|---|
| PV of $1 | 5 | 10% | 0.6209 |
| FV of $1 | 5 | 10% | 1.6105 |
| PV ordinary annuity | 5 | 10% | 3.7908 |
| FV ordinary annuity | 5 | 10% | 6.1051 |
| PV annuity due | 5 | 10% | 4.1699 |
What is the machine's net present value? (round to the nearest dollar)
$7010
($86)
$13548
$10172
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Introduction to Managerial Accounting
Authors: Peter C. Brewer, Ray H Garrison, Eric Noreen, Suresh Kalagnanam, Ganesh Vaidyanathan
4th Canadian edition
978-1259103261
