Mango Madness Company is considering purchasing equipment. The equipment will produce the following cash flows: Year $1 \quad \$ 40,000$
Year $2 \quad \$ 30,000$ Mango Madness requires a minimum rate of return of 10%. What is the maximum price Mango Madness should pay for this equipment?

Question

Quizplus · Accepted Answer

The maximum price is the present value of the cash flows discounted at the required rate of return (10%). The present value of $40,000 in year 1 is $36,363.64 and $30,000 in year 2 is $24,793.46, totaling $61,157.10.

Mango Madness Company Is Considering Purchasing Equipment 1$40,0001 \quad \$ 40,0001$40,000

Mango Madness Company Is Considering Purchasing Equipment $1 \quad \$ 40,000$