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Business, 06.05.2020 07:11 chant9

Dobson Contractors is considering buying equipment at a cost of $75,000. The equipment is expected to generate cash flows of $15,000 per year for eight years and can be sold at the end of eight years for $5,000. Interest is at 12%. Assume the equipment would be paid for on the first day of year one, but that all other cash flows occur at the end of the year. Ignore income tax considerations. Determine the net present value of the cash flows and if Dobson should purchase the machine. a. $194,256 negative net present value of the cash flows. Based on present value considerations, Dobson Construction should not buy the machine. b. $194,256 positive net present value of the cash flows. Based on present value considerations, Dobson Construction should buy the machine. c. $1,534 negative net present value of the cash flows. Based on present value considerations, Dobson Construction should not buy the machine. d. $1,534 positive net present value of the cash flows. Based on present value considerations, Dobson Construction should buy the machine.

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