Question

ment FULL SCREEN PRINTER VERSION NEXT Brief Exercise A-22 Barney Googal owns a garage and is contemplating purchasing a tire retreading machine for $15,820. After estimating costs and revenues, Barney projects a net cash Inflow from the retreading machine of $3,900 annually for 6 years. Barney hopes to earn a return of 9% on such Investments Click here to view the factor table. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What is the present value of the retreading operation? (Round answer to 2 decimal places, .0. 25.25.) Present value Should Barney Googal purchase the retreading machine? Barney Googal purchase the retreading machine. Click if you we should not low Work for this question: Open Show Work should LINK TO TEXT By accessing this question Assistance, you will learn while you earn points based on the point Potential policy set by your instructor SUBMIT ANSWER Question Attempts: 0 of 3 used SAVE FOR LATER Earn Maximum Points available only if you answer this question correctly in two attempts Version 4.24.17.1 x I 2000-2019 John Wiley Sons Inc. All Rights Reserved. A Division of John Wiley Sons Inc.

Answer 1

Present value:

Present value of the cash inflows = Annual cash inflows x Present value annuity factor (6 years, 9% )

= $3,900 x 4.48592

= $17,495.09

Net present value:

Present value of the cash inflows	$17,495.09
(less): Cost of retreading machine	($15,820)
Net present value	$1,675.09

Net present value is positive.Hence,

Barney googal should purchase the retreading machine