42

Boulder Milling is evaluating a proposal to invest in a new piece of equipment costing $100,000 with the following annual cash flows over the equipment's 4-year useful life: Cash revenues $120,000 Cash expenses (64,000) Depreciation expenses (straight-line) (20,000) Income provided from equipment $36,000 Cost of capital 12 percent Using a spreadsheet or financial calculator, determine the net present value for the investment. The investment's net present value is:

	$ 9,345
	$170,092
	$ 70,092
	$264,482

41

Urbana Corporation is considering the purchase of a new machine costing $172,000. The machine would generate net cash inflows of $46,428 per year for 5 years. At the end of 5 years, the machine would have no salvage value. Urbana's cost of capital is 14 percent. Urbana uses straight-line depreciation. Using a spreadsheet or financial calculator, determine the net present value for the investment. The proposal's net present value is (rounded to the nearest dollar):

	$ (12,609)
	$ 13,374
	$ 13,712
	$159,391

41

Urbana Corporation is considering the purchase of a new machine costing $172,000. The machine would generate net cash inflows of $46,428 per year for 5 years. At the end of 5 years, the machine would have no salvage value. Urbana's cost of capital is 14 percent. Urbana uses straight-line depreciation. Using a spreadsheet or financial calculator, determine the net present value for the investment. The proposal's net present value is (rounded to the nearest dollar):

	$ (12,609)
	$ 13,374
	$ 13,712
	$159,391