?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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