Vextra Corporation is considering the purchase of new equipment costing $38,500.

Question

Vextra Corporation is considering the purchase of new equipment costing $38,500. The projected annual cash inflow is $11,700, 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: Periods 12 Percent 1 0.8929 2 1.6901 3 2.4018 4 3.0373 What is the net present value of the machine (rounded to the nearest whole dollar)? $(35,536). $(3,800). $38,500. $5,536. $(2,964).

Explanation / Answer

Net present value of the machine = (11700*3.0373)-38500= -2964

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