For each of the following independent scenarios, use Table 2 to calculate the present value of the cash flow described. Round to the nearest dollar. 

(1) $1,000 will be received at the end of each year for six years. The rate is 12 percent.

(2) $1,000 will be received at the end of each year for six years. The rate is 15 percent.

(3) $10,000 will be received at the end of each year for six years. The rate is 7 percent.

(4) $250,000 will be received at the end of each year for four years. The rate is 10 percent.

Table 8.2

Transcribed Image Text:

Net Present Value Calculation for Copy Machine Investment by Jackson's Quality Copies Today Year Year Year Timeline (n)- 0 2 3 Year 4 Year 5 Year 6 Year 7 Purchase price $(50,000) Maintenance cost Labor savings $( 1,000) $( 1,000) 11,000 11,000 11,000 $( 1,000) $( 1,000) $( 1,000) $( 1,000) $( 1,000) 11,000 11,000 11,000 11,000 Salvage value Total cash in (out) PV factor (r =10%) Present value $(50,000) x1.0000 $ 10,000 $ 10,000 $10,000 $ 10,000 $ 10,000 $ 10,000 5,000 $ 15,000 x0.9091 X0.8264 x0.7513 X0.6830 X0.6209 X0.5645 x0.5132 $(50,000) +$9,091 + $ 8,264 +$ 7,513 +$ 6,830 +$ 6,209 +$5,645 + $ 7,698 Because net present value (NPV) is 0, accept the investment. (The investment provides a return greater than 10%.) = $1,250 Net Present Value