4.

The management of Kunkel Company is considering the purchase of a $22,000 machine that would reduce operating costs by $5,000 per year. At the end of the machines five-year useful life, it will have zero scrap value. The companys required rate of return is 16%.

Click here to view Exhibit 8B-1 and Exhibit 8B-2, to determine the appropriate discount factor(s) using table.

Required:

1. Determine the net present value of the investment in the machine.

net present value __________

2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? (Any cash outflows should be indicated by a minus sign.)

Item	Cash Flow	Years	Total Cash Flows
Annual cost savings			$0
Initial investment			0
Net cash flow			$0

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