A company is considering the purchase of new equipment for $45,000.
The projected annual net cash flows are $19,000.
The machine has a useful life of 3 years and no salvage value.
Management of the company requires a 12% return on investment.
The present value of an annuity of 1 for various periods follows:
Period PV of an annuity of 1 at 12%
1 0.8929
2 1.6901
3 2.4018
What is the net present value of this machine, assuming all cash flows occur at year-end?
a) $(1,768).
b) $3,000.
c) $634.
d) $19,000.
e) $45,634.
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