Lloyd's Moving Company is considering purchasing new equipment that costs $728,000
Its management estimates that the equipment will generate cash flows as follows:
Year 1 $214,000
2 214,000
3 264,000
4 264,000
5 150,000
Present value of $1:
6% 7% 8% 9% 10%
1 0.943 0.935 0.926 0.917 0.909
2 0.890 0.873 0.857 0.842 0.826
3 0.840 0.816 0.794 0.772 0.751
4 0.792 0.763 0.735 0.708 0.683
5 0.747 0.713 0.681 0.650 0.621
The company's annual required rate of return is 9%. Using the factors in the table, calculate the present value of the cash flows. (Round all calculations to the nearest whole dollar.)
A) $892,000
B) $864,646
C) $853,320
D) $894,000
B .B)
Calculation of present value of cash inflows:
Cash Inflows PV factors at 9% Present Value
$214,000 0.917 $196,238
214,000 0.842 180,188
264,000 0.772 203,808
264,000 0.708 186,912
150,000 0.650 97,500
$864,646
You might also like to view...
Jennifer, Inc entered into a five-year capital lease on December 31, 2016. This lease requires five minimum annual lease payments due on December 31 of each year. The first minimum payment was paid on December 31, 2016. This payment included which of the following? Interest Expense Lease Obligation I. No Yes II. Yes No III. Yes Yes IV. No No ?
A) I B) II C) III D) IV
The national economy and design trends are two examples of factors in a company's ________
A) microenvironment B) competitive environment C) technological environment D) legal environment E) macroenvironment
Which of the following accounting research areas is based on the efficient markets hypothesis?
a. The decision-model approach b. Behavioral research c. Critical accounting d. Capital markets research
Revenue per employee may be used to measure partnership (LLC) efficiency
Indicate whether the statement is true or false