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?Lloyd\'s Moving Company is considering purchasing new equipment that costs $$71

ID: 2533591 • Letter: #

Question

?Lloyd's Moving Company is considering purchasing new equipment that costs

$$714,000.

Its management estimates that the equipment will generate cash flows as?follows:

Year 1

$$216,000

2

216,000

3

268,000

4

268,000

5

164,000

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.

$ $916,000

B.

$ $883,184

C.

$ $918,000

D.

$ 836,910

Year 1

$$216,000

2

216,000

3

268,000

4

268,000

5

164,000

Explanation / Answer

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=216000*0.917+216000*0.842+268000*0.772+268000*0.708+164000*0.650

which is equal to

=$883184.

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