Allied Company is considering the purchase of a machine. The machine will produce cash flows for the next two years as follows:
Year 1 $80,000
Year 2 $90,000
What is the maximum price Allied should pay for this machine if they have a cost of capital of 12%?

Question

Quizplus · Accepted Answer

($80,000 x .89256) + ($90,000 x 71,.79719) = $143,176
(FV x PVIF, n = 1, I = 12%) + (FV x PVIF, n = 2, I = 12%)

Allied Company Is Considering the Purchase of a Machine