Alice Springs Tailors Wants to Purchase a New Cutting Machine

Alice Springs Tailors wants to purchase a new cutting machine for its sewing plant.The investment is expected to generate annual cash inflows of $400 000.The required rate of return is 12% and the current machine is expected to last for four years.What is the maximum dollar amount Alice Springs Tailors would be willing to spend for the machine,assuming its life is also four years? Ignore income taxes.

A) $820 600
B) $991 740
C) $607 000
D) $1 214 800