A new asset is expected to provide service over the next four years. It will cost $500,000, generates annual cash inflows of $150,000, and requires cash operating expenses of $30,000 each year. In addition, a $10,000 overhaul will be needed in year 3.PeriodFV of 1(i = 10%) FV of a series of $1 cash flows (i = 10%) PV of $1(i = 10%) PV of a series of $1 cash flows (i = 10%)1 1.100 1.000 0.909 0.909 2 1.210 2.100 0.826 1.736 3 1.331 3.310 0.751 2.487 4 1.464 4.641 0.683 3.170 If the company requires a 10% rate of return, the net present value of this machine would be:
A. $(129,600), and the machine does not meet the company's rate-of-return requirement.
B. $(127,110), and the machine meets the company's rate-of-return requirement.
C. $(127,110), and the machine does not meet the company's rate-of-return requirement.
D. $(151,700), and the machine meets the company's rate-of-return requirement.
E. None of the answers is correct.
Answer: C
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