Answered: he management of River Corporation is…

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	Operating Income	Net Cash Flow
1	$20,000	$95,000
2	20,000	95,000
3	20,000	95,000
4	20,000	95,000
5	20,000	95,000

The net present value for this investment is

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