Forge Company wants to purchase a new cutting machine for its sewing plant. The investment is expected to generate annual cash inflows of $140,000. The required rate of return is 10% and the current machine is expected to last for seven years. Of the following choices, which is the dollar amount the company would be willing to spend for the machine, assuming its life is also seven years? Income taxes are not considered.
A) $1,328,180
B) $882,000
C) $702,660
D) $681,520

Question

Quizplus · Accepted Answer

X = $140,000 × PV Ann 7 (10%) = $140,000 × 4.868
X= $681,520

Forge Company Wants to Purchase a New Cutting Machine for Its