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Mendez Gaming Company has an opportunity to purchase a pinball machine. The machine is expected to produce a net cash inflow of $1,400 per year
Mendez Gaming Company has an opportunity to purchase a pinball machine. The machine is expected to produce a net cash inflow of $1,400 per year for 5 years and to have a $1,000 salvage value at the end of the machine's useful life. Assuming an ordinary annuity and a 5% required rate of return, the present value of the machine is
a) $6,845.
b) $6,061.
c) $5,277.
d) None of the answers is correct.
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