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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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    Solution Preview

    I will ignore taxes.

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

    Solution Summary

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

    $2.19