Figure 14-10.Present Value of $1

question 79

Essay

Figure 14-10.Present value of $1
Present value of an Annuity of $1

-Refer to Figure 14-10. Ray Corporation is looking to invest in a new piece of equipment. Two manufacturers of this type of equipment are being considered. After-tax inflows for the two competing projects are:
Both projects require an initial investment of $400,000. In both cases, assume that the equipment has a life of 5 years with no salvage value.
Required:
A. Assuming a discount rate of 8%, compute the net present value of each piece of equipment.
B. A third option is now available for a supplier outside of the country. The cost is also $400,000, but it will produce even cash flows over its 5-year life. What must the annual cash flow be for this equipment to be selected over the other two? Assume an 8% discount rate.

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Definitions:

Temporary Leave

Temporary leave is a period of time when an employee is officially allowed to be absent from their workplace for various reasons, such as health issues or personal matters.

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A short-term collaboration or relationship established to achieve a specific goal.

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A professional who has gained a significant amount of expertise and knowledge in managing through years of practice and learning.

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