5107 Anthony operates a part time auto repair service He est

5,107

Anthony operates a part time auto repair service. He estimates that a new diagnostic computer system will result in increased cash inflows of $1,500 in Year 1, $2,100 in Year 2, and $3,200 in Year 3, If Anthony\'s required rate of return is 10%, then the most he would be willing to pay for the new diagnostic computer system would be (Ignore income taxes.): Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using the tables provided. Multiple Choice $4,599 $5,501 $5,638

Solution

Cash Inflow Discount Factor @ 10% Present Value Year 1 1500 0.91 1,364 Year 2 2100 0.83 1,735 Year 3 3200 0.75 2,403 Total 5,501 The Maximum earning with this will be 5501/- So Anthony would pay maximum amount equal to amount earned So the answer is 5501/-