(Ignore income taxes in this problem.) Charley has a typing service. He estimate

Question

(Ignore income taxes in this problem.) Charley has a typing service. He estimates that a new computer will result in increased cash inflow $2,000 in Year 1, $2,400 in Year 2 and $3,400 in Year 3.

Click here to view Exhibit 8B-1 to determine the appropriate discount factor(s) using tables.

If Charley's required rate of return is 11%, the most that Charley would be willing to pay for the new computer would be

(Ignore income taxes in this problem.) Charley has a typing service. He estimates that a new computer will result in increased cash inflow $2,000 in Year 1, $2,400 in Year 2 and $3,400 in Year 3.

Charley has a typing service. He estimates that a new computer will result in increased cash inflow $2,000 in Year 1, $2,400 in Year 2 and $3,400 in Year 3. Click here to view Exhibit 8B-1 to determine the appropriate discount factor(s) using tables. If Charley's required rate of return is 11%, the most that Charley would be willing to pay for the new computer would be

Explanation / Answer

If Charley's required rate of return is 11%, the most that Charley would be willing to pay for the new computer would be

Amount = 2000*0.901+ 2400*0.812 + 3400*0.731 = $6236.20

Answer: $6236.20

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