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A company is considering the purchase of new equipment for $87,000. The projected annual net...

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Accounting

A company is considering the purchase of new equipment for $87,000. The projected annual net cash flows are $34,000. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 8% return on investment.

The present value of an annuity of 1 for various periods follows:

Periods: 1 2 3

Present value of an annuity of $1 at 8%: .9259 1.7833 2.5771

What is the net present value of this machine assuming all cash flows occur at year end?

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