Daniels Corporation Is Considering the Purchase of New Equipment Costing

question 146

Multiple Choice

Daniels Corporation is considering the purchase of new equipment costing $30,000.The projected annual after-tax net income from the equipment is $1,200, after deducting $10,000 for depreciation.The revenue is to be received at the end of each year.The machine has a useful life of three years and no salvage value.Daniels requires a 12% return on its investments.The factors for the present value of $1 for different periods follow: $\begin{array}{lr}\underline { \text { Periods }} & \underline { \text { 12 Percent }} \\1 & 0.8929 \\2 & 0.7972 \\3 & 0.7118 \\4 & 0.6355\end{array}$ What is the net present value of the machine?

• A)$24,018
• B)$(3,100)
• C)$30,000
• D)$26,900
• E)$(29,520)

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