Crown Company is considering the purchase of equipment that costs $60,000. If th

Question

Crown Company is considering the purchase of equipment that costs $60,000. If the useful life is expected to be 5 years and Crown's required rate of return is 10%, what is the minimum annual cash inflow that the equipment must offer for the investment to be acceptable? (Do not round your PV factors and intermediate calculations. Round your final answer to the nearest dollar.)

A.$15,027

B.$15,828

C.$16,644

D.$18,928

Please explain the answer with equations/how you solved it, not just providing the answer. Thanks!

Explanation / Answer

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

60000=Annuity[1-(1.1)^-5]/0.1

60000=Annuity[1-0.620921323]/0.1

60000=Annuity*(0.379078676/0.1)

60000=Annuity*3.790786769

Annuity=60000/3.790786769

=$15828(Approx),

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