A company is considering the purchase of new equipment for $45,000. The projected annual net cash flows are $19,000. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 12% return on investment. The present value of an annuity of $1 for various periods follows. Present value of an annuity of $1 at 12% 0.8929 1.6901 2.4018 What is the net present value of this machine (rounded to the nearest whole dollar) assuming all cash flows occur at year-end? Period 1 2 3
A company is considering the purchase of new equipment for $45,000. The projected annual net cash flows are $19,000. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 12% return on investment. The present value of an annuity of $1 for various periods follows. Present value of an annuity of $1 at 12% 0.8929 1.6901 2.4018 What is the net present value of this machine (rounded to the nearest whole dollar) assuming all cash flows occur at year-end? Period 1 2 3
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:$(1,768)
$3,000
凸
$634
$19,000
$45,634
Transcribed Image Text:A company is considering the purchase of new equipment for $45,000. The projected annual net cash flows are $19,000. The
machine has a useful life of 3 years and no salvage value. Management of the company requires a 12% return on investment. The
present value of an annuity of $1 for various periods follows:
Present value of an annuity of $1 at 12%
0.8929
1.6901
2.4018
What is the net present value of this machine (rounded to the nearest whole dollar) assuming all cash flows occur at year-end?
Period
1
2
3
Multiple Choice
$(1,768)
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