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
$20,000
$3,500
$929
$23,500
$58,442
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