$$\text { Reference: } 10 - 02$$ Oriental Company Has Gathered the Following Data on a Proposed

$$\text { Reference: } 10 - 02$$ Oriental Company has gathered the following data on a proposed investment project: $$\begin{array} { | l | l | } \hline \text { Investment in depreciable equipment } & \$ 200,000 \\\hline \text { Annual net cash flows } & \$ 50,000 \\\hline \text { Life of the equipment } & 10 \text { years } \\\hline \text { Salvage value } & \$ 20 \\\hline \text { Discount rate } & 10 \% \\\hline\end{array}$$ The company uses straight-line depreciation on all equipment.
-Stratford Company purchased a machine with an estimated useful life of seven years. The machine will generate cash inflows of $90,000 each year over the next seven years. If the machine has no salvage value at the end of seven years, and assuming the company's discount rate is 10%, what is the purchase price of the machine if the net present value of the investment is $170,000?

A) $170,000.
B) $268,120.
C) $438,120.
D) $221,950.

Correct Answer:

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