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Lostsunrise [7]
3 years ago
7

Vextra Corporation is considering the purchase of new equipment costing $43,500. The projected annual cash inflow is $12,700, 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:
Business
1 answer:
Ksju [112]3 years ago
3 0

Answer:

Year Cashflow [email protected]%    PV

               $        $

1                  12,700            0.8929   11,339

2                 12,700            0.7972    10,124

3                 12,700            0.7118       9,040

4                 12,700            0.6355      <u>8,071</u>

                  Present value of annuity  <u>38,574</u>

Explanation:

In this case, there is need to discount the cashflow for each year at 12%. then, we will add the present values of cashflows in order to obtain the present value of annuity.

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Given Information:

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