A company bought Machine 1 on March 5, 2014 for $5,000 cash. The estimated salvage was $200 and the estimated life was 11 years. On March 5, 2015, the company learned that it could buy a different machine for $8,000 cash. The new machine would save the company an estimated $250 per year compared to Machine 1. The new machine would have no estimated salvage and an estimated life of 10 years. The company could get $3,000 for Machine 1 on March 5, 2015. Which of the following calculations would best assist the company in deciding whether to purchase the new machine? (Ignore taxes) (PV of an annuity of $250) + $3,000 - $8,000 (PV of an annuity of $250) - $8,000 + $200 (PV of an annuity of $250) + $3,000 - $8,000 - $5,000 (PV of an annuity of $250) + $3,000 - $8,000 - $4,800 (PV of an annuity of $250) + $3,000 - $5,000
A company bought Machine 1 on March 5, 2014 for $5,000 cash. The estimated salvage was $200 and the estimated life was 11 years. On March 5, 2015, the company learned that it could buy a different machine for $8,000 cash. The new machine would save the company an estimated $250 per year compared to Machine 1. The new machine would have no estimated salvage and an estimated life of 10 years. The company could get $3,000 for Machine 1 on March 5, 2015. Which of the following calculations would best assist the company in deciding whether to purchase the new machine? (Ignore taxes) (PV of an annuity of $250) + $3,000 - $8,000 (PV of an annuity of $250) - $8,000 + $200 (PV of an annuity of $250) + $3,000 - $8,000 - $5,000 (PV of an annuity of $250) + $3,000 - $8,000 - $4,800 (PV of an annuity of $250) + $3,000 - $5,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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- A company bought Machine 1 on March 5, 2014 for $5,000 cash. The estimated salvage was $200 and the estimated life was 11 years. On March 5, 2015, the company learned that it could buy a different machine for $8,000 cash. The new machine would save the company an estimated $250 per year compared to Machine 1. The new machine would have no estimated salvage and an estimated life of 10 years. The company could get $3,000 for Machine 1 on March 5, 2015. Which of the following calculations would best assist the company in deciding whether to purchase the new machine? (Ignore taxes)
- (PV of an annuity of $250) + $3,000 - $8,000
- (PV of an annuity of $250) - $8,000 + $200
- (PV of an annuity of $250) + $3,000 - $8,000 - $5,000
- (PV of an annuity of $250) + $3,000 - $8,000 - $4,800
- (PV of an annuity of $250) + $3,000 - $5,000
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