The management of Arkansas Corporation is considering the purchase of a new machine costing $490,000. The...
The management of Arkansas Corporation is considering the
purchase of a new machine costing $490,000. The company's desired
rate of return is 10%. The present value factors for $1 at compound
interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751,
0.683, and 0.621, respectively. In addition to the foregoing
information, use the following data in determining the
acceptability of this investment:
Year |
Income from Operations |
Net Cash Flow |
||
| 1 | $100,000 | $180,000 | ||
| 2 | 40,000 | 120,000 | ||
| 3 | 40,000 | 100,000 | ||
| 4 | 10,000 | 90,000 | ||
| 5 | 10,000 | 120,000 | ||
The net present value for this investment is
a.$(126,800)
b.$(16,170)
c.$55,200
d.$36,400
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The management of Arkansas Corporation is considering the
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