Present Value of $1
Present Value of an Annuity of $1

question 13

Multiple Choice

Present value of $1
Present value of an annuity of $1
$\begin{array}{|c|l|l|l|l|l|l|}\hline \text { Periods } & 4 \% & 6 \% & 8 \% & 10 \% & 12 \% & 14 \% \\\hline 1 & 0.962 & 0.943 & 0.926 & 0.909 & 0.893 & 0.877 \\\hline 2 & 0.925 & 0.890 & 0.857 & 0.826 & 0.797 & 0.769 \\\hline 3 & 0.889 & 0.840 & 0.794 & 0.751 & 0.712 & 0.675 \\\hline 4 & 0.855 & 0.792 & 0.735 & 0.683 & 0.636 & 0.592 \\\hline 5 & 0.822 & 0.747 & 0.681 & 0.621 & 0.567 & 0.519 \\\hline 6 & 0.790 & 0.705 & 0.630 & 0.564 & 0.507 & 0.456 \\\hline 7 & 0.760 & 0.665 & 0.583 & 0.513 & 0.452 & 0.400 \\\hline 8 & 0.731 & 0.627 & 0.540 & 0.467 & 0.404 & 0.351 \\\hline 9 & 0.703 & 0.592 & 0.500 & 0.424 & 0.361 & 0.308 \\\hline 10 & 0.676 & 0.558 & 0.463 & 0.386 & 0.322 & 0.270 \\\hline\end{array}$ $\begin{array}{|c|l|l|l|l|l|l|}\hline \text { Periods } & 4 \% & 6 \% & 8 \% & 10 \% & 12 \% & 14 \% \\\hline 1 & 0.962 & 0.943 & 0.926 & 0.909 & 0.893 & 0.877 \\\hline 2 & 1.886 & 1.833 & 1.783 & 1.736 & 1.690 & 1.647 \\\hline 3 & 2.775 & 2.673 & 2.577 & 2.487 & 2.402 & 2.322 \\\hline 4 & 3.630 & 3.465 & 3.312 & 3.170 & 3.037 & 2.914 \\\hline 5 & 4.452 & 4.212 & 3.993 & 3.791 & 3.605 & 3.433 \\\hline 6 & 5.242 & 4.917 & 4.623 & 4.355 & 4.111 & 3.889 \\\hline 7 & 6.002 & 5.582 & 5.206 & 4.868 & 4.564 & 4.288 \\\hline 8 & 6.733 & 6.210 & 5.747 & 5.335 & 4.968 & 4.639 \\\hline 9 & 7.435 & 6.802 & 6.247 & 5.759 & 5.328 & 4.946 \\\hline 10 & 8.111 & 7.360 & 6.710 & 6.145 & 5.650 & 5.216 \\\hline\end{array}$
-Refer to the Figure.Gibb Clinical Practice is considering an investment in new imaging equipment that will cost $400,000.The equipment is expected to yield cash inflows of $80,000 per year for a six-year period.At the end of the sixth year,the firm expects to recover $150,000 from the sale of the equipment.Gibb set a required rate of return at 10%.What is the net present value of the investment? (Note: there may be a rounding error depending on the table you use to compute your answer.Choose the answer closest to the result you calculate.)

• A)($177,280)
• B)($33,000)
• C)$33,000
• D)$45,200

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Definitions:

Efficiency

The optimal production and distribution of resources in a way that maximizes the net benefit to society or an economy.

Total Surplus

A measure of society's overall net advantage resulting from the consumption and production of a good or service, comprised of both consumer and producer surplus.

Fire Marshal

An official responsible for enforcing fire safety codes and regulations, as well as investigating fires to determine their cause.

Total Surplus

In economics, the total net gain to society from trading in a market, equal to the sum of consumer and producer surplus.