The management of Cooper Corporation is considering the purchase of a new machine costing $420,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for one through five years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to this information, use the following data in determining the acceptability in this situation: Year Income from Operations Net Cash Flow 1 $100,000 $180,000 2 40,000 120,000 3 20,000 100,000 4 10,000 90,000 5 10,000 90,000 The present value index for this investment is a.0.36. b.1.08. c.0.92. d.1.45.
The management of Cooper Corporation is considering the purchase of a new machine costing $420,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for one through five years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to this information, use the following data in determining the acceptability in this situation: Year Income from Operations Net Cash Flow 1 $100,000 $180,000 2 40,000 120,000 3 20,000 100,000 4 10,000 90,000 5 10,000 90,000 The present value index for this investment is a.0.36. b.1.08. c.0.92. d.1.45.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The management of Cooper Corporation is considering the purchase of a new machine costing $420,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for one through five years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to this information, use the following data in determining the acceptability in this situation:
The present value index for this investment is
| Year | Income from Operations | Net |
| 1 | $100,000 | $180,000 |
| 2 | 40,000 | 120,000 |
| 3 | 20,000 | 100,000 |
| 4 | 10,000 | 90,000 |
| 5 | 10,000 | 90,000 |
The present value index for this investment is
a.0.36.
b.1.08.
c.0.92.
d.1.45.
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