Help Save Exit ation is considering the purchase of new equi

Help Save& Exit ation is considering the purchase of new equipment costing $30,000. The projected annual after-tax net income from he equipment is $1.200, after deducting $10,000 for depreciation. The revenue is to be received at the end of each year. The machine has a useful life of 3 yea annuity of $1 for different periods follows: rs and no salvage value. Butler requires a 12% return on its investments. The present value of an Periods 128 0.8929 1.6901 2.4018 3.0373 What is the net present value of the machine?

Solution

Net income 1200 Add: Depreciation 10000 Cashflow 11200 n=3 years i=12% Cashflow Amount PV Factor Present Value Annual cash flow Present value for 3 years @ 12% 11200 3.0373 33600 Less: Initial investment 30000 Net present value 3600 Answer is $ 3600 Note: I have ignored fractions in PV factor for reaching to the answer in option