Daniels Corporation Is Considering the Purchase of New Equipment Costing

question 102

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:
$$\begin{array} { l r } \underline{\text { Periods }} & \underline{12 \text { Percent }} \\1 & 0.8929 \\2 & 0.7972 \\3 & 0.7118 \\4 & 0.6355\end{array}$$
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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