40] A company is considering the purchase of new equipment for $90,000. The projected annual net cash flows are $35,500. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 12% return on investment. The present value of an annuity of 1 for various periods follows:
|
Periods
|
Present value of an annuity of 1 at 12%
|
|
1
|
0.8929
|
|
2
|
1.6901
|
|
3
|
2.4018
|
What is the net present value of this machine assuming all cash flows occur at year-end?
$30,000
$4,500
$(4,736)
$34,500
$82,862