Poe Company Is Considering the Purchase of New Equipment Costing

question 157

Multiple Choice

Poe Company is considering the purchase of new equipment costing $80,000. The projected net cash flows are $35,000 for the first two years and $30,000 for years three and four. The revenue is 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.

• A) $(15,731).
• B) $(4,896).
• C) $15,731.
• D) $4,896.
• E) $23,775.

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