Question
Door to Door Moving Company is considering purchasing new equipment that costs $720, 000. Its management estimates that the equipment will generate cash flows as
Door to Door Moving Company is considering purchasing new equipment that costs $720, 000. Its management estimates that the equipment will generate cash flows as follows:
Year 1 | $ 204, 000 | ||
2 | 204, 000 | ||
3 | 262, 000 | ||
4 | 262, 000 | ||
5 | 160, 000 | ||
Present value of $1:
6% | 7% | 8% | 9% | 10% | |
1 | 0.943 | 0.935 | 0.926 | 0.917 | 0.909 |
2 | 0.890 | 0.873 | 0.857 | 0.842 | 0.826 |
3 | 0.840 | 0.816 | 0.794 | 0.772 | 0.751 |
4 | 0.792 | 0.763 | 0.735 | 0.708 | 0.683 |
5 | 0.747 | 0.713 | 0.681 | 0.605 | 0.621 |
The company's annual required rate of return is 8%. Using the factors in the table, calculate the present value of the cash inflows. (Round all calculations to the nearest whole dollar.)
A. $888, 000
B. $786, 000
C. $36, 312
D. $873, 290
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