The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. 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 Income from Operations Net Cash Flow 1 $18,750 $93,750 2 18,750 93,750 3 18,750 93,750 4 18,750 93,750 5 18,750 93,750 The net present value for this investment is: The answer is $19,875. How did they get this number?
The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. 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 Income from Operations Net Cash Flow 1 $18,750 $93,750 2 18,750 93,750 3 18,750 93,750 4 18,750 93,750 5 18,750 93,750 The net present value for this investment is: The answer is $19,875. How did they get this number?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired
Year |
Income from |
Net Cash |
1 |
$18,750 |
$93,750 |
2 |
18,750 |
93,750 |
3 |
18,750 |
93,750 |
4 |
18,750 |
93,750 |
5 |
18,750 |
93,750 |
The net present value for this investment is:
The answer is $19,875. How did they get this number?
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