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Poe Company is considering the purchase of new equipment costing $86,000. The projected annual cash inflows are $36,200, to be received at the end of
| Poe Company is considering the purchase of new equipment costing $86,000. The projected annual cash inflows are $36,200, to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Poe requires a 10% return on its investments. The present value of an annuity of 1 and present value of an annuity for different periods is presented below. Compute the net present value of the machine. |
| Periods | Present Value of 1 at 10% | Present Value of an Annuity of 1 at 10% |
| 1 | 0.9091 | 0.9091 |
| 2 | 0.8264 | 1.7355 |
| 3 | 0.7513 | 2.4869 |
| 4 | 0.6830 | 3.1699 |
Multiple Choice
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$28,750.
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$46,598.
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$(15,762).
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$15,762.
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$(28,750).
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