cash inflows
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Free InquirySkytop Co., a nonprofit entity, is considering acquiring a machine for $80,000 that will produce uniform cash inflows of $25,000 for four years. Skytop evaluates capital projects using discounted cash flows at a cost of capital of 10% per year. Based upon the following table, what action should
Skytop take regarding acquisition of the machine, and why?
Future value of $1 for 4 years at 10% $1.464
Present value of $1 for 4 years at 10% $0.683
Future value of $1 ordinary annuity for 4 years at 10% $4.641
Present value of $1 ordinary annuity for 4 years at 10% $3.170
Acquire: Reason:
A. Yes Net cash flow is $20,000
B. Yes Net future value is $36,025
C. No Net present value is ($750)
D. No Net present value is ($8,750)
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