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Poe Company is considering the purchase of new equipment costing $86,000. The projected annual cash inflows...

Poe Company is considering the purchase of new equipment costing $86,000. The projected annual cash inflows are $36,200, to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Poe requires a 10% return on its investments. The present value of an annuity of 1 and present value of an annuity for different periods is presented below. Compute the net present value of the machine.
Periods Present Value of 1 at 10% Present Value of an Annuity of 1 at 10%
1 0.9091 0.9091
2 0.8264 1.7355
3 0.7513 2.4869
4 0.6830 3.1699

Multiple Choice

  • $28,750.

  • $46,598.

  • $(15,762).

  • $15,762.

  • $(28,750).

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