Asked by
kalai agnes
on Nov 12, 2024
Verified
The management of Arkansas Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for Years 1 through 5 are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability of this investment: 
The net present value for this investment is
A) $36,400
B) $55,200
C) $(16,170)
D) $(126,800)
Net Present Value
The difference between the present value of cash inflows and outflows over a period of time, used to assess the profitability of an investment.
Compound Interest
This refers to the calculation of interest on both the initial amount deposited or borrowed as well as on the interest that has already been accumulated over previous periods.
Desired Rate of Return
The minimum percentage of gain or profit expected by an investor from an investment.
- Acquire insight into the net present value and its role in the process of deciding on investments.
Verified Answer
AM
Learning Objectives
- Acquire insight into the net present value and its role in the process of deciding on investments.