Use the Following Information for Questions 106-108 $\text { Present Value of an Annuity of } 1$

question 119

Multiple Choice

Use the following information for questions 106-108.
Cleaners, Inc. is considering purchasing equipment costing $60,000 with a 6-year useful life. The equipment will provide cost savings of $14,600 and will be depreciated straight-line over its useful life with no salvage value. Cleaners requires a 10% rate of return. $\text { Present Value of an Annuity of } 1$
$\begin{array}{ll}\text { Periods } &8\%& 9 \% & 10 \% & 11 \%& 12 \%&15\%\\5&4.623&4.486&4.355&4.231&4.111&3.784\end{array}$

-What is the approximate net present value of this investment?

• A) $27,600
• B) $3,583
• C) $1,772
• D) $5,496

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Definitions:

Utility

A measure of satisfaction or happiness that a consumer receives from consuming goods and services.

Expected Utility Function

A concept in economics and decision theory that represents an individual's preference for a set of possible outcomes based on a probability distribution.

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A fixed amount of money that is guaranteed to be paid under specified conditions.

Lottery

A form of gambling involving the drawing of numbers at random for a prize, often regulated by governmental entities.