The Zeron Corporation wants to purchase a new machine for its factory operations at a cost of $475,000. The investment is expected to generate $175,000 in annual cash flows for a period of four years. The required rate of return is 14%. The old machine can be sold for $25,000. The machine is expected to have zero value at the end of the four-year period. What is the net present value of the investment? Would the company want to purchase the new machine? Income taxes are not considered.
A)$59,775; yes
B)$34,775; no
C)$509,775; yes
D)$163,375; no

Question

Quizplus · Accepted Answer

The net present value of the investment is $59,775. The company would want to purchase the new machine because the net present value is positive.

The Zeron Corporation Wants to Purchase a New Machine for Its