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.PeriodsPresent Valueof $1 at 10%Present Value of anAnnuity of $1 at 10%1 0.9091 0.9091 2 0.8264 1.7355 3 0.7514 2.4869 4 0.6830 3.1699
A. $4,896.
B. $23,775.
C. $(15,731).
D. $(4,896).
E. $15,731.
Answer: B
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