Freeman Corporation bought a piece of machinery.Selected data is presented below:
$\begin{array}{l}
\begin{array}{l}
\text { Usefull life } &6 years\
\text { Yearly net cash inflow }&\$45,000 \
\text { Salvage value }&-0- \
\text { Internal rate of return }&18\% \
\text { Cost of capital }&15\%
\end{array}\
\end{array}$
Present value tables or a financial calculator are required.
The initial cost of the machinery was

Question

Quizplus · Accepted Answer

The initial cost of the machinery can be calculated using the present value of an annuity formula. With an IRR of 18% and a 6-year life, the present value factor is approximately 3.497 (from present value tables). Multiplying this by the annual cash inflow of $45,000 gives $157,392.

Freeman Corporation Bought a Piece of Machinery Present Value Tables or a Financial Calculator Are Required