Meredith Products Inc.is considering a new equipment purchase.The estimated cost of the equipment is $80 000.The equipment is expected to generate annual operating cash inflows for the next three years as follows:
$$\begin{array} { c c }
\text { Year } & \text { Annual cash flow } \
\hline 1 & \$40000 \
2 & \$30000 \
3 & \$20000
\end{array}$$
The equipment is expected to have a salvage value at the end of its useful life of $15 000.The company uses a discount rate of 14 per cent.
Required: Compute the net present value of the equipment.(Ignore income taxes)

Question

Meredith Products Inc.is considering a new equipment purchase.The estimated cost of the equipment is $80 000.The equipment is expected to generate annual operating cash inflows for the next three years as follows:
$$\begin{array} { c c } 
\text { Year } & \text { Annual cash flow } \
\hline 1 & \$40000 \
2 & \$30000 \
3 & \$20000
\end{array}$$ 
The equipment is expected to have a salvage value at the end of its useful life of $15 000.The company uses a discount rate of 14 per cent.
Required: Compute the net present value of the equipment.(Ignore income taxes)

Quizplus · Accepted Answer

The Answer of Meredith Products Inc.is considering a new equipment purchase.The estimated cost of the equipment is $80 000.The equipment is expected to generate annual operating cash inflows for the next three years as follows:
$$\begin{array} { c c } 
\text { Year } & \text { Annual cash flow } \
\hline 1 & \$40000 \
2 & \$30000 \
3 & \$20000
\end{array}$$ 
The equipment is expected to have a salvage value at the end of its useful life of $15 000.The company uses a discount rate of 14 per cent.
Required: Compute the net present value of the equipment.(Ignore income taxes)

Meredith Products Inc Year Annual cash flow 1$400002$300003$20000\begin{array} { c c } \text { Year } & \text { Annual cash flow } \\\hline 1 & \$40000 \\2 & \$30000 \\3 & \$20000\end{array} Year 123​ Annual cash flow $40000$30000$20000​​

Meredith Products Inc $\begin{array} { c c } \text { Year } & \text { Annual cash flow } \\\hline 1 & \$40000 \\2 & \$30000 \\3 & \$20000\end{array}$