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The management of London Corporation is considering the purchase of a new machine costing $750,000....

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Accounting

The management of London Corporation is considering the purchase of a new machine costing $750,000. The company's desired rate of return is 6%. The present value factors for $1 at compound interest of 6% for one through five years are 0.943, 0.890, 0.840, 0.792, and 0.747, respectively. In addition to this information, use the following data in determining the acceptability in this situation:

Year

Income from Operations

Net Cash Flow

1

$37,500

$187,500

2

37,500

187,500

3

37,500

187,500

4

37,500

187,500

5

37,500

187,500

The present value index for this investment is ___

A. 1.00

B. 1.05

C. 0.95

D. 1.25

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