A company is considering the purchase of new equipment for $42,000. The projected annual cash inflow is $18,000. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 12% return on investment. The present value of an annuity of $1 for various periods follows:
Period Present value of an annuity of 1 at 12%
1 0.8929
2 1.6901
3 `2.4018
What is the net present value of this machine assuming all cash flows occur at year-end?

Question

Quizplus · Accepted Answer

The Answer of A company is considering the purchase of new equipment for $42,000. The projected annual cash inflow is $18,000. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 12% return on investment. The present value of an annuity of $1 for various periods follows:
Period Present value of an annuity of 1 at 12%
1 0.8929
2 1.6901
3 `2.4018
What is the net present value of this machine assuming all cash flows occur at year-end?

A Company Is Considering the Purchase of New Equipment for $42,000