Butler corporation is considering the purchase of new equipment costing $30,000. the projected annual after-tax net income from the equipment is $1,200, after deducting $10,000 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 12% return on its investments. the present value of an annuity of $1 for different periods follows:

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31 January, 22:57

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Justice Klein · Answer 1

Net annual cash flows

1,200+10,000=11,200

Net present value is

PV of annual cash flows-project investment

11,200*2.4018-30,000 = (3,100)