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21 January, 14:23

The management of Arkansas Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation: Year Income from Operations Net Cash Flow 1 $100,000 $180,000 2 40,000 120,000 3 40,000 100,000 4 10,000 90,000 5 10,000 120,000 The net present value for this investment is: Selected Answer: Correct1. Negative $16,170 Correct Answer: Correct1. Negative $16,170

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  1. 21 January, 14:40
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    Negative $16,170, Project should be Rejected

    Explanation:

    According to the following calculations

    NPV = (180.000*0.909 + 120.000*0.826 + 100.000*0.751 + 90.000*0.683 + 120.000*.621) - 490.000 = (16.170) negative.

    Project should be Rejected.
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