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The management of River Corporation is considering the purchase of a new machine costing $380,000. The company's desired rate of return is 6%. The present valu factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of th investment: Year 1 2 3 4 5 Income from Operations. $20,000 20,000 20,000 20,000 20,000 Net Cash Flow $95,000 95,000 95,000 95,000 95,000 The net present value for this investment is a. $(20,140) O b. $(19,875) O c. $19,875 $30 140

The management of River Corporation is considering the purchase of a new machine costing $380,000. The company's desired rate of return is 6%. The present valu factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of th investment: Year 1 2 3 4 5 Income from Operations. $20,000 20,000 20,000 20,000 20,000 Net Cash Flow $95,000 95,000 95,000 95,000 95,000 The net present value for this investment is a. $(20,140) O b. $(19,875) O c. $19,875 $30 140

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The management of River Corporation is considering the purchase of a new machine costing $380,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year 1 2 3 4 5 Income from Operations $20,000 20,000 20,000 20,000 20,000 Net Cash Flow $95,000 95,000 95,000 95,000 95,000 The net present value for this investment is O a. $(20,140) O b. $(19,875) O c. $19,875 O d. $20,140
Transcribed Image Text:The management of River Corporation is considering the purchase of a new machine costing $380,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year 1 2 3 4 5 Income from Operations $20,000 20,000 20,000 20,000 20,000 Net Cash Flow $95,000 95,000 95,000 95,000 95,000 The net present value for this investment is O a. $(20,140) O b. $(19,875) O c. $19,875 O d. $20,140
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