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Compute the net present value of the machine

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Question

Poe Company is considering the purchase of new equipment costing $82,500. The projected net cash flows are $37,500 for the first two years and $32,500 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.

Periods Present Value of $1 at 10% Present Value of an

Annuity of $1 at 10% 1 0.9091 0.9091 2 0.8264 1.7355 3 0.7513 2.4869 4 0.6830 3.1699

Reference no: EM132314879

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