he management of River Corporation is considering the purchase of a new machine costing $380,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
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Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 18EB: Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the...
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The management of River Corporation is considering the purchase of a new machine costing $380,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment:


Year
Operating
Income
Net Cash
Flow
1 $20,000      $95,000     
2 20,000      95,000     
3 20,000      95,000     
4 20,000      95,000     
5 20,000      95,000     

The net present value for this investment is 

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