36] Poe Company is considering the purchase of new equipment costing $89,000. The projected annual cash inflows are $39,200, to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Poe requires a 10% return on its investments. The present value of an annuity of 1 and present value of an annuity for different periods is presented below. Compute the net present value of the machine.
|
Periods
|
Present Value of 1 at 10%
|
Present Value of an Annuity of 1 at 10%
|
|
1
|
0.9091
|
0.9091
|
|
2
|
0.8264
|
1.7355
|
|
3
|
0.7513
|
2.4869
|
|
4
|
0.6830
|
3.1699
|
$35,260.
$53,730.
$(35,260).
$(21,196).
$21,196.