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30 July, 10:40

A company is considering the purchase of new equipment for $45,000. the projected annual net cash flows are $19,000. 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: period 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? multiple choice $ (1,768) $3,000 $634 $19,000

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  1. 30 July, 11:03
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    Compute present value

    Pv=net annual cash flow*interest factor at (12%,3years)

    Pv=19,000*2.4018=45,634

    Net present value

    Pv of annual cash flows-project investment

    45,634-45,000=634 ... answer
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