8-2

Exercise 8-2 Net Present Value Method [LO8-2] The management of Kunkel Company is considering the purchase of a $26,000 machine that would reduce operating costs by $6,500 per year. At the end of the machine's five-year usefu life, it will have zero scrap value. The company's required rate of return is 16% Click here to view Exhibit 88-1 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 t present value 2. 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.) Total Cash Flows Item Cash Flow Years Annual cost savings Initial investment Net cash flow