Health Care Systems of the South is about to buy an expensive piece of diagnostic equipment. The company estimates that it will generate uniform revenues of $500,000 for each of the next eight years. What is the present value of this stream of earnings, at an interest rate of 6%?
What is the present value if the machine lasts only six years, not eight?
If the equipment cost $2,750,000, should the company purchase it?

Question

Health Care Systems of the South is about to buy an expensive piece of diagnostic equipment. The company estimates that it will generate uniform revenues of $500,000 for each of the next eight years. What is the present value of this stream of earnings, at an interest rate of 6%?
 What is the present value if the machine lasts only six years, not eight?
 If the equipment cost $2,750,000, should the company purchase it?

Quizplus · Accepted Answer

The Answer of Health Care Systems of the South is about to buy an expensive piece of diagnostic equipment. The company estimates that it will generate uniform revenues of $500,000 for each of the next eight years. What is the present value of this stream of earnings, at an interest rate of 6%?
 What is the present value if the machine lasts only six years, not eight?
 If the equipment cost $2,750,000, should the company purchase it?

Health Care Systems of the South Is About to Buy