Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
Butler Corporation is considering the purchase of new equipment costing $87,000
Butler Corporation is considering the purchase of new equipment costing $87,000. The projected annual after-tax net income from the equipment is $3,100, after deducting $29,000 for depreciation. The revenue is to be received at the end of each year. The machine has a useful life of 3 years and no salvage value. Butler requires a 8% return on its investments. The present value of an annuity of $1 for different periods follows:
Periods8%10.925921.783332.577143.3121
What is the net present value of the machine?
Multiple Choice
- $82,725.
- $87,000.
- $(4,275).
- $9,300.
- $74,736.
Expert Solution
Net present value is as follows;
Annual cash flows=Net income+Depreciation
=(3100+29000)
=$32100
Present value of inflows=Annual cash flows*Present value of annuity factor(8%,3)
=$32100* 2.577097
=$ 82724.81
NPV=Present value of inflows- Present value of outflows
=$ 82724.81- $87000
= $(4275)
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
