Question - Bozo Brothers purchased a machine that will be depreciated on the straight-line basis over an estimated useful life of 7 years with no salvage value. The machine is expected to generate cash flow, net of taxes, of $80,000 in each of the next 7 years. Bozo's expected rate of return is 12%. Information on present value factors is as follows.
Present value of $1 at 12% for seven periods - 0.452
Present value of an ordinary annuity of $1 at 125 for seven periods - 4.564
Assuming a positive net present value of $12,720, what was the original cost of the machine?
$240,400
$253,120
352,400
$377,840