Question

115 Poe Company is considering the purchase of new equipment costing $80,500. The projected net cash...

115

Poe Company is considering the purchase of new equipment costing $80,500. The projected net cash flows are $35,500 for the first two years and $30,500 for years three and four. The revenue is 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 $1 and present value of an annuity of $1 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

Multiple Choice

  • $(16,816).

  • $(5,801).

  • $16,816.

  • $5,801.

  • $24,859.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Butler Corporation is considering the purchase of new equipment costing $36,000. The projected annual after-tax net...
Butler Corporation is considering the purchase of new equipment costing $36,000. The projected annual after-tax net income from the equipment is $1,400, after deducting $12,000 for depreciation. The revenue is to be received at the end of each year. The machine has a useful life of 3 years and no salvage value. Butler requires a 10% return on its investments. The present value of an annuity of $1 for different periods follows: Periods 10% 1 0.9091 2 1.7355 3 2.4869...
The following relates to a proposed equipment purchase: Cost $ 156,000 Salvage value $ 4,500 Estimated...
The following relates to a proposed equipment purchase: Cost $ 156,000 Salvage value $ 4,500 Estimated useful life 4 years Annual net cash flows $ 52,100 Depreciation method Straight-line Ignoring income taxes, the annual net income amount used to calculate the accounting rate of return is: Multiple Choice $52,100 $14,225 $15,350 $89,975 $50,975 Poe Company is considering the purchase of new equipment costing $81,000. The projected net cash flows are $36,000 for the first two years and $31,000 for years...
Yale Inc. has two independent investment opportunities, each requiring an initial investment of $260,000. The company's...
Yale Inc. has two independent investment opportunities, each requiring an initial investment of $260,000. The company's required rate of return is 10 percent. The cash inflows for each investment are provided below Investment A Investment B Year 1 $140,000 $20,000 Year 2 100,000 40,000 Year 3 60,000 60,000 Year 4 40,000 80,000 Year 5 20,000 160,000 Total inflows $360,000 $360,000 Factors: Present Value of $1 Factors: Present Value of an Annuity (r = 10%) (r = 10%) Year 0 1.0000...
A project requires an initial investment of $1,500,000 and will return $420,000 each year for six...
A project requires an initial investment of $1,500,000 and will return $420,000 each year for six years. Factors: Present Value of an Annuity (r = 10%) Year 1 0.9091 Year 2 1.7355 Year 3 2.4869 Year 4 3.1699 Year 5 3.7908 Year 6 4.3553 Use this data to answer questions 15 and 16: If taxes are ignored and the required rate of return is 10%, what is the project's net present value (rounded to the nearest dollar)? (5pts) a. $1,262,910...
Copa Corporation is considering the purchase of a new machine costing $150,000. The machine would generate...
Copa Corporation is considering the purchase of a new machine costing $150,000. The machine would generate net cash inflows of $43,690 per year for 5 years. At the end of 5 years, the machine would have no salvage value. Copa’s cost of capital is 12 percent. Copa uses straight-line depreciation. The present value factors of annuity of $1.00 for different rates of return are as follows: Period 12% 14% 16% 18% 4 3.03735 2.91371 2.79818 2.69006 5 3.60478 3.43308 3.27429...
CHOOSE THE CORRECT ANSWER: 1) PVC Corporation is considering an investment proposal in which a technology...
CHOOSE THE CORRECT ANSWER: 1) PVC Corporation is considering an investment proposal in which a technology investment of $10,000 would be required. The investment would provide cash inflows of $2,000 per year for six years. The technology investment will have no salvage value at the end of six years. If the company's discount rate is 10%, the investment's net present value is closest to (Ignore income taxes.): (See the time value of money BELOW THE PAGE.) A. $1,289 B. $(1,289)...
Grady Corp. is considering the purchase of a new piece of equipment. The equipment costs $51,500,...
Grady Corp. is considering the purchase of a new piece of equipment. The equipment costs $51,500, and will have a salvage value of $5,040 after six years. Using the new piece of equipment will increase Grady’s annual cash flows by $6,190. Grady has a hurdle rate of 12%. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor from the PV tables.) a. What is the present value of...
Tulsa Company is considering investing in new bottling equipment and has two options: Option A has...
Tulsa Company is considering investing in new bottling equipment and has two options: Option A has a lower initial cost but would require a significant expenditure to rebuild the machine after four years; Option B has higher maintenance costs, but also has a higher salvage value at the end of its useful life. Tulsa’s cost of capital is 11 percent. The following estimates of the cash flows were developed by Tulsa’s controller:   A B Initial Investment 320,000 454,000 Annual Cash...
Concord, Inc. is considering purchasing equipment costing $48000 with a 6-year useful life. The equipment will...
Concord, Inc. is considering purchasing equipment costing $48000 with a 6-year useful life. The equipment will provide annual cost savings of $12000 and will be depreciated straight-line over its useful life with no salvage value. Concord requires a 10% rate of return. Present Value of an Annuity of 1 Period 8% 9% 10% 11% 12% 15% 6 4.623 4.486 4.355 4.231 4.111 3.784 What is the approximate net present value of this investment? $5832 $4260 $2771 $24000
XYZ Company is considering the purchase of new equipment that will cost $130,000. The equipment will...
XYZ Company is considering the purchase of new equipment that will cost $130,000. The equipment will save the company $38,000 per year in cash operating costs. The equipment has an estimated useful life of five years and a zero expected salvage value. The company's cost of capital is 10%. Required: 1) Ignoring income taxes, compute the net present value and internal rate of return. Round net present value to the nearest dollar and round internal rate of return to the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT