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 Operating Income 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 average rate of return for this investment is a.10% b.15% c.5% d.25%
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 Operating Income 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 average rate of return for this investment is a.10% b.15% c.5% d.25%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired
Year | Operating Income |
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 average rate of
a.10%
b.15%
c.5%
d.25%
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