Assignment
Paramount Company is considering purchasing new equipment costing$700,000. The management has estimated that the equipment will generate cash flows asfollows:
|
Year 1
|
$200,000
|
|
2
|
200,000
|
|
3
|
250,000
|
|
4
|
250,000
|
|
5
|
150,000
|
Present value of$1:
|
6%
|
6%
|
7%
|
8%
|
9%
|
|
1
|
0.943
|
0.935
|
0.926
|
0.917
|
0.909
|
|
2
|
0.89
|
0.873
|
0.857
|
0.842
|
0.826
|
|
3
|
0.84
|
0.816
|
0.794
|
0.772
|
0.751
|
|
4
|
0.792
|
0.763
|
0.735
|
0.708
|
0.683
|
|
5
|
0.747
|
0.713
|
0.681
|
0.65
|
0.621
|
Thecompany's required rate of return is8%. Using the factors in thetable, calculate the present value of the cash inflows. (Round all calculations to the nearest wholedollar)
A. $890,000
B. $841,000
C. $750,000
D. $850,000.