Answer Happy

Exercise 10-4A Determining the present value of an annuity The dean of the School of Fine Arts is trying to decide whether to purchase a copy machine to place in the lobby of the building. The machine would add to student convenience, but the dean feels compelled to earn an 8 percent return on the investment of funds. Estimates of cash inflows from copy machines that have been placed in other university buildings indicate that the copy machine would probably produce incremental cash inflows of approximately $25,000 per year. The machine is expected to have a three-year useful life with a zero salvage value. Required Round your figures to two decimal points. a. Use Present Value Appendix Table 1 to determine the maximum amount of cash the dean should be willing to pay for a copy machine. h. Use Present Value Appendix Table 2 to determine the maximum amount of cash the dean should be willing to pay for a copy machine. c. Explain the consistency or lack of consistency in the answers to Requirements a and b. LO
SELF-STUDY REVIEW PROBLEM lectures and accompanying sellessessment quizes are evala in Connect for all learning c the 10 of Mo Corporation is coming so each opportunity foliow Aequired Year 1 Year 2 Year 3 Year 4 $144,000 $147.000 $100.000 $138.000 204,000 199.000 114.000 112.000 investments are an initial payment of $400,000 Ade's desde o LIPA Year 2 Year 2 ww Pof Compte the set pesest value approach? the the screostal value of each project. Which project should Ads adopshot on the net had to compte the pack period fx ap which perfect should Advo adopt hand in the pack approach ve summat Salution to Requirement a Contatvestment Projed P2 Net present valu Your 2 W3 Year 4 Tai Cost of investment -ugh Cric Net present value Cash doists fore Project 1 $144,000 147.500 160,000 178.000 of X x X opportunities. The expected Project 2 Fact 034200 0743163 40 0352291 Cashflow Table Factor $204.000 X 0302009 = 199,000 x 0743160 114,000 X 0640658 112,000 X 055221 11h4,18% e shid adope Project 2 since it has a groter net present va laken to Requirement b Cash In Your Year 2 Tot Project 1 $144,000 147.000 $291.000 Present V Project 2 1204.000 199,000 1403,000 5:20130 109245 102.505 99.300 WIKF Panning for Capital ver 800 000 134100 Presenta $175.002 147889 32005 61.857 458643 400.000 $58443 By the end of the second yrat Project 2's cash isflows have mor this paid for the cost of the is contrast Project I still falls short of investmery by $100.000 (100000 Ad should adopt Project 2 since it has a shorur pyhack period -