Chapter 12, Problem 1MAD

San Lucas Corporation is considering investment in robotic machinery based upon the following estimates:

1. a. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of $700,000. Use the present value tables appearing in Exhibits 2 and 5 of this chapter.
2. b. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of $500,000, $700,000, and $900,000. Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer.
3. c. Determine the minimum annual net cash flow necessary to generate a positive net present value, assuming a desired rate of return of 10%. Round to the nearest dollar.
4. d. Interpret the results of parts (a), (b), and (c).