Zoey Company is considering purchasing new equipment that co

Zoey Company is considering purchasing new equipment that costs $700,000. Its management estimates that the equipment will generate cash inflows as follows: S214,000 2 214,000 262,000 262,000 170,000 Year 1

Solution

1 Present value of cash inflows = (214000*0.909)+(214000*0.826)+(262000*0.751)+(262000*0.683)+(170000*0.621)= $852568 2 Present value fo the first option = 150000*4.486= $672900