Home Express Moving Company is considering purchasing new equipment that costs $728,000.Its management estimates that the equipment will generate cash inflows as follows: $$\begin{array} { | r | r | }
\hline \text { Year } 1 & \$ 214,000 \
\hline 2 & 214,000 \
\hline 3 & 264,000 \
\hline 4 & 264,000 \
\hline 5 & 150,000 \
\hline
\end{array}$$ Present value of $1:
$$\begin{array} { | l | r | r | r | r | r | }
\hline & { 6 \% } &7\%& 8\%& { 9 \% } & 10 \% \
\hline 1 & 0.943 & 0.935 & 0.926 & 0.917 & 0.909 \
\hline 2 & 0.890 & 0.873 & 0.857 & 0.842 & 0.826 \
\hline 3 & 0.840 & 0.816 & 0.794 & 0.772 & 0.751 \
\hline 4 & 0.792 & 0.763 & 0.735 & 0.708 & 0.683 \
\hline 5 & 0.747 & 0.713 & 0.681 & 0.650 & 0.621 \
\hline
\end{array}$$ The company's annual required rate of return is 9%.Using the factors in the table,calculate the present value of the cash flows.(Round all calculations to the nearest whole dollar.)

Question

Home Express Moving Company is considering purchasing new equipment that costs $728,000.Its management estimates that the equipment will generate cash inflows as follows: $$\begin{array} { | r | r | } 
\hline \text { Year } 1 & \$ 214,000 \
\hline 2 & 214,000 \
\hline 3 & 264,000 \
\hline 4 & 264,000 \
\hline 5 & 150,000 \
\hline
\end{array}$$ Present value of $1:
$$\begin{array} { | l | r | r | r | r | r | } 
\hline & { 6 \% } &7\%& 8\%&  { 9 \% } & 10 \% \
\hline 1 & 0.943 & 0.935 & 0.926 & 0.917 & 0.909 \
\hline 2 & 0.890 & 0.873 & 0.857 & 0.842 & 0.826 \
\hline 3 & 0.840 & 0.816 & 0.794 & 0.772 & 0.751 \
\hline 4 & 0.792 & 0.763 & 0.735 & 0.708 & 0.683 \
\hline 5 & 0.747 & 0.713 & 0.681 & 0.650 & 0.621 \
\hline
\end{array}$$ The company's annual required rate of return is 9%.Using the factors in the table,calculate the present value of the cash flows.(Round all calculations to the nearest whole dollar.)

Quizplus · Accepted Answer

To calculate the present value of the cash flows at a 9% discount rate, we multiply each year's cash inflow by the corresponding present value factor for 9%, then sum these values:- Year 1: $214,000 * 0.917 = $196,238- Year 2: $214,000 * 0.842 = $180,188- Year 3: $264,000 * 0.772 = $203,808- Year 4: $264,000 * 0.708 = $186,912- Year 5: $150,000 * 0.650 = $97,500Adding these amounts gives a total present value of $864,646 (rounded to the nearest whole dollar).

Home Express Moving Company Is Considering Purchasing New Equipment That