MC Qu. 104 Butler Corporation is considering... Buter Corporation is considering

Question

MC Qu. 104 Butler Corporation is considering... Buter Corporation is considering the purchase of new equipment costing $75,000. The projected annual after-tax net income from the equipment salvage value. Butler requires a 12% return on its investments. The present value of an 25.000 for depreciation. The revenue is to be received at the end of each year. The machine has a useful life of 3 years a annuity of $1 for different periods follows 0.8929 2 1.6901 2.4018 4 3.0373 What is the net present value of the machine? Multple Choice MacBook Air s38 5 6 9

Explanation / Answer

NPV = $-8,470 Statement showing Cash flows Particulars Time PVf 12% Amount PV Cash Outflows                        -                        1.00                         (75,000.00)                         (75,000.00) PV of Cash outflows = PVCO                         (75,000.00) Cash inflows = 2700 + 25000 1-3                 2.4018                           27,700.00                           66,529.86 PV of Cash Inflows =PVCI                           66,529.86 NPV= PVCI - PVCO                           (8,470.14)

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