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Main Menu Contents Grades Course (-) Timer-Notes Evaluate Feedback-Print ?Info Reconsider the lecture example regarding Middletown Community College. The college has decided not to rent vending machines but instead to buy them. X Company will sell machines to Middletown and promises to buy them back in four years. Assume that Middletown's annual profit equation for the snack operation is $0.09(X) - $55,100, where X is the number of snack items sold. Middletown expects to sell 790,000 snack items in each of the next four years. X Company is willing to negotiate the purchase price with Middletown, but it promises to purchase the machines back in four years for $4,000. Assuming Middletown wants a 790 return on this investment, what is the most they can pay for the vending machines? Submit Answer Tries 0/3

Explanation / Answer

Annual net cash flows 16000 =(790000*0.09)-55100 Present value of Annual net cash flows 54192 =16000*3.387 Present value of salvage value 3052 =4000*0.763 Maximum amount to be paid 57244

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