Physician's Pharmacy is considering the purchase of a copying machine, which it will make available to customers at a per-copy charge. The copying machine has an initial cost of $7,500, an estimated useful life of five years, and an estimated salvage value of $500. The estimated annual revenue and expenses relating to operation of the machine are as follows:
All revenue will be received in cash; expenses other than depreciation will be paid in cash. Depreciation will be computed by the straight-line method.If you select answer d, indicate the correct amount.
-Refer to the above data. The net present value of the proposed investment, discounted at an annual rate of 15% and rounded to the nearest dollar, is (tables show that using a discount rate of 15%, the present value of $1 due in five years is 0.497, and the present value of a five year $1 annuity is 3.352):

Question

Physician's Pharmacy is considering the purchase of a copying machine, which it will make available to customers at a per-copy charge. The copying machine has an initial cost of $7,500, an estimated useful life of five years, and an estimated salvage value of $500. The estimated annual revenue and expenses relating to operation of the machine are as follows:
  All revenue will be received in cash; expenses other than depreciation will be paid in cash. Depreciation will be computed by the straight-line method.If you select answer d, indicate the correct amount.
-Refer to the above data. The net present value of the proposed investment, discounted at an annual rate of 15% and rounded to the nearest dollar, is (tables show that using a discount rate of 15%, the present value of $1 due in five years is 0.497, and the present value of a five year $1 annuity is 3.352):

Quizplus · Accepted Answer

[($2,500 × 3.352) + ($500 × .497) -$7,500] = $1,128.50

Physician's Pharmacy Is Considering the Purchase of a Copying Machine