Poe Company Is Considering the Purchase of New Equipment Costing

question 39

Multiple Choice

Poe Company is considering the purchase of new equipment costing $80,000. The projected annual cash inflows are $30,200, to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Poe requires a 10% return on its investments. The present value of $1 and present value of an annuity of $1 for different periods is presented below. Compute the net present value of the machine. $$\begin{array} { c c c } \text { Periods } & \text { Present Value } & \text { Present Value of ary } \\ & \text { of } \$ 1 \text { at } 10 \% & \text { Aruruity of } \$ 1 \text { at } 10 \% \\1 & 0.9091 & 0.9091 \\2 & 0.8264 & 1.7355 \\3 & 0.7514 & 2.4869 \\4& 0.6830 & 3.1699\end{array}$$

• A) $(15,731).
• B) $(4,896).
• C) $15,731.
• D) $4,896.
• E) $32,334.

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