Saget Company is considering the purchase of equipment that would cost $35,000 and offer annual cash inflows of $10,500 over its useful life of 5 years.Assuming a required rate of return of 8%,what is the net present value of this investment opportunity?

Question

Quizplus · Accepted Answer

Revised estimate:
Net present value = (Expected annual cash flows x PV factor)- Cost of investment
Net present value = ($10,500 x 3.992710)- $35,000 = $6,923 (rounded)
PV factor from Appendix Table 2 (n = 5,i = 8)

Saget Company Is Considering the Purchase of Equipment That Would