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A company wishes to buy new equipment for $130,000. The equipment is expected to generate an additional $57,500 in cash inflows for four years. All cash flows occur at year-end. A bank will make an $130,000 loan to the company at a 10% interest rate so that the company can purchase the equipment. Use the table below to determine the present value of the future cash flows and the net present value of the investment.
| Year | Present value of 1 at 10% |
| 0 | 1.0000 |
| 1 | 0.9091 |
| 2 | 0.8264 |
| 3 |
0.7513 |
| 4 | 0.6830 |
rev: 04_17_2014_QC_48548
| $230,000 and $72,500 respectively | |
| $239,764 and $109,764 respectively | |
| $182,264 and $104,527 respectively | |
| $239,764 and $196,564 respectively | |
| $182,264 and $52,264 respectively |
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