(Ignore Income Taxes in This Problem

question 145

Multiple Choice

(Ignore income taxes in this problem.) Frick Road Paving Corporation is considering an investment in a curb-forming machine. The machine will cost $180,000, will last 10 years, and will have a $30,000 salvage value at the end of 10 years. The machine is expected to generate net cash inflows of $40,000 per year in each of the 10 years. Frick's discount rate is 10%. The net present value of the proposed investment is closest to:

• A)$250,000
• B)$65,800
• C)$245,800
• D)$77,380

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Definitions:

Equivalent Value

The same worth or monetary value as something else.

Rate of Return

The positive or negative financial outcome on an investment through a specific duration, indicated as a percent of the cost of the investment.

Scheduled Payments

Pre-determined payments made at regular intervals, such as monthly mortgage or loan payments.

Compounded Quarterly

Interest calculation method where the interest earned is added to the principal every quarter, increasing the amount on which subsequent interest is calculated.