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The management of Arnold Corporation is considering the purchase of a new machine costing $430,000. The company's desired rate of return is 10%. The present
The management of Arnold Corporation is considering the purchase of a new machine costing $430,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to this information, use the following data in determining the acceptability of the proposed purchase:
Year | Operating Income | Net Cash Flow |
1 | $100,000 | $180,000 |
2 | 40,000 | 120,000 |
3 | 20,000 | 100,000 |
4 | 10,000 | 90,000 |
5 | 10,000 | 90,000 |
What is the net present value for this investment?
a.$152,000
b.$(25,200)
c.$(124,800)
d.$25,200
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