TB MC Qu. 24-112 (Algo) A company is considering... A company is considering...
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TB MC Qu. 24-112 (Algo) A company is considering...
A company is considering the purchase of new equipment for $60,000. The projected annual net cash flows are $24,500. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 10% return on investment. The present value of an annuity of $1 for various periods follows:
| Period | Present value of an annuity of $1 at 10% |
|---|---|
| 1 | 0.9091 |
| 2 | 1.7355 |
| 3 | 2.4869 |
What is the net present value of this machine (rounded to the nearest whole dollar) assuming all cash flows occur at year-end?
Multiple Choice
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$20,000
-
$3,500
-
$929
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$23,500
-
$58,442
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