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Question(s) / Instruction(s):

The management of Arnold Corporation is considering the purchase of a new machine costing $200,000. The company\'s desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation:

Year       Income from Net Cash  Year Operations Flow

1              $50,000                                 $90,000

2              20,000                                   60,000

3              10,000                                  50,000

4              5,000                                     45,000

5              5,000                                    45,000

The present value index for this investment is

A.            0.88

B.            1.45

C.            1.14

D.            0.70

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