Whitton Corporation Uses a Discount Rate of 16

Multiple Choice

Whitton Corporation uses a discount rate of 16%. The company has an opportunity to buy a machine now for $18,000 that will yield cash inflows of $10,000 per year for each of the next three years. The machine would have no salvage value. The net present value of this machine is closest to (Ignore income taxes.) :Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.

A) $22,460
B) $4,460
C) $(9,980)
D) $12,000