Question

In: Accounting

A company is considering purchasing new equipment. The purchase of the equipment is       expected to...

A company is considering purchasing new equipment. The purchase of the equipment is
      expected to generate after tax savings of $12,600 each year for 8 years. The company can
      borrow money at 6%. Assume annual compounding.  

      Determine the present value of the future cash inflows.

Hint: the $12,600 are your annuity payments

Solutions

Expert Solution

The present value of the future cash inflows is calculated as follows:

The present value of the future cash inflows = $12,600 * PVIFA ( 8 Years ,6%)

                                                                = $12,600 * 6.2097938

                                                                = $78,243

The present value of the future cash inflows is $78,243

ekkarill92 answered 2 years ago
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