Vextra Corporation is considering the purchase of new equipment costing $35,000.

Question

Vextra Corporation is considering the purchase of new equipment costing $35,000. The projected annual cash inflow is $11,000, to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Vextra requires a 12% return on its investments. The present value of an annuity of $1 for different periods follows:

What is the net present value of the machine (rounded to the nearest whole dollar)?

($33,410).

($3,100).

$35,000.

$3,410.

($1,590).

Explanation / Answer

Net present value                     

Investment                                        ( $35,000)

Cash inflow 11,000* 3.0373             ($33,410)

Net present value                              (1590)      

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