Rooney, Incorporated is considering the purchase of a new machine costing $700,000. The machine's useful life is expected to be 8 years with no salvage value. The straight-line depreciation method will be used. The net increase in annual after-tax cash flow is expected to be $156,000. Rooney estimates its cost of capital to be 12%. (The present value of a $1 annuity for 8 years at 12% is 4.968, and the present value of $1 to be received in 8 years is 0.404.) The net present value of the investment in the machine under consideration is: Multiple Choice $156,000. $75,008. $87,500. $126,800.

Rooney, Incorporated is considering the purchase of a new machine costing $700,000. The machine's useful life is expected to be 8 years with no salvage value. The straight-line depreciation method will be used. The net increase in annual after-tax cash flow is expected to be $156,000. Rooney estimates its cost of capital to be 12%. (The present value of a $1 annuity for 8 years at 12% is 4.968, and the present value of $1 to be received in 8 years is 0.404.) The net present value of the investment in the machine under consideration is: Multiple Choice $156,000. $75,008. $87,500. $126,800.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 4P

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