Question
The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present
The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment:
| Year | Operating Income | Net Cash Flow | |
| 1 | $18,750 | $93,750 | |
| 2 | 18,750 | 93,750 | |
| 3 | 18,750 | 93,750 | |
| 4 | 18,750 | 93,750 | |
| 5 | 18,750 | 93,750 |
The average rate of return for this investment is
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Intermediate Accounting
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
10th Edition
324300980, 978-0324300987
