Question

Newport Corp. is considering the purchase of a new piece ofequipment. The cost savings from the equipment would result in anannual increase in cash flow of $200,000. The equipment will havean initial cost of $825,000 and have a 6 year life. There is nosalvage value for the equipment. If the hurdle rate is 11%, what isthe approximate net present value? Ignore income taxes.(Future Value of $1, Present Value of $1, Future ValueAnnuity of $1, Present Value Annuity of $1.) (Useappropriate factor from the PV tables. Round your final answer tothe nearest dollar amount.)

$846,100

$275,000

$21,100

$825,000