Question: Stella Co. is considering purchasing a machine that will produce annual savings of $22,000 at the end of the year. Stella requires a 12% rate

Stella Co. is considering purchasing a machine that will produce annual savings of $22,000 at the end of the year. Stella requires a 12% rate of return and the asset has a 5-year useful life.

Present Value of Annuity of 1 Present Value of 1

Period 12% Period 12%

5 3.605 5 .567

How much should Stella agree to pay for this machine?

Select one:

a. $43,386

b. $79,310

c. $110,000

d. $62,370

e. None of the above

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