The Management of California Corporation Is Considering the Purchase of a New

The management of California Corporation is considering the purchase of a new machine costing $400,000. 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 the foregoing information, use the following data in determining the acceptability of this investment: $$\begin{array} { l l l } & \text { Income from } & \text { Net Cash } \\\text { Year } & \text { Operations } & \text { Flow } \\1 & \$ 100,000 & \$ 180,000 \\2 & 40,000 & 120,000 \\3 & 20,000 & 100,000 \\4 & 10,000 & 90,000 \\5 & 10,000 & 90,000\end{array}$$ The present value index for this investment is

A) 0.88
B) 1.45
C) 0.98
D) 0.70