The management of Arnold Corporation is considering the purchase of a new machin
ID: 2352178 • Letter: T
Question
The management of Arnold Corporation is considering the purchase of a new machine costing $200,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation:Income from Net Cash
Year Operations Flow
1 $50,000 $90,000
2 20,000 60,000
3 10,000 50,000
4 5,000 45,000
5 5,000 45,000
The present value index for this investment is
a. .88. b. 1.45. c. 1.14. d. .70.
Explanation / Answer
its c. 1.14. https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&ved=0CCMQxQEwAA&url=https%3A%2F%2Fdocs.google.com%2Fviewer%3Fa%3Dv%26q%3Dcache%3APwRY9_j4c0UJ%3Aprofessorzapalski.tripod.com%2Fcourses%2FACC2052%2FACC2052t4sg.doc%2B%26hl%3Den%26pid%3Dbl%26srcid%3DADGEESgJW29TDqEN3YQVTay_TnUvXZp7u62ZriD3kNVtQ-bf7YAWV3z0kK0j9AV5WD7cXRGi_gLfZq7muqkGlpoymfbdBdOrHM_Y4WUfWmLvTXvq01r6O_Ij6xztd3IN0HLRehf1Pa_S%26sig%3DAHIEtbSsI8hn6RtehMus7S7seND09fW2Gg&ei=Y11oUKieCpPK9gSW24CQDg&usg=AFQjCNEftRrkoGJn0Sqx-0ii0j2IhKdyWg
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