(TCO 7) Bozo Brothers purchased a machine that will be depreciated on the straight-line basis

TCO 8) The Chicago division sells goods internally to the Detroit division of the same company
February 12, 2020
XYZ Corporation purchased 10, $1,000, 8% bonds of Jackson Corporation
February 12, 2020

(TCO 7) Bozo Brothers purchased a machine that will be depreciated on the straight-line basis over an estimated

useful life of 7 years with no salvage value. The machine is expected to generate cash flow, net of taxes, of $80,000 in each of the next 7 years. Bozo’s expected rate of return is 12%. Information on present value factors is as follows.

Present value of $1 at 12% for seven periods                                                        0.452

Present value of an ordinary annuity of $1 at 125 for seven periods                        4.564

Assuming a positive net present value of $12,720, what was the original cost of the machine?

$240,400

$253,120

352,400

$377,840

 
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