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Guard Company invests in a new piece of equipment costing $4

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22. Guard Company invests in a new piece of equipment costing $40,000. The equipment is expected to yield the following amounts per year for the equipment's 4-year useful life:
Cash Revenues $60,000
Cash Expenses $32,000
Depreciation Expense (Straight Line) $10,000
Income Provided from Equipment $18,000
In the current interest rate environment, the present value factor of one dollar received over a four-year period is 3.000. What is the net present value for the equipment?

a $20,952
b $28,286
c $41,905
d $44,000

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The expert examines a Guard Company invested in a new piece of equipment costing.

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I will ignore taxes.

The cash flow annuity is $60,000 - $32,000 = $28,000 x PV ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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