Question
Arjun is the financial advisor for his company and is considering the purchase of excavation equipment which will cost $63,000. The purchase of this equipment
Arjun is the financial advisor for his company and is considering the purchase of excavation equipment which will cost $63,000. The purchase of this equipment is expected to save his company $6,438 at the end of every year for 12 years. At the end of the 12 years, he expects the excavation equipment to have a residual (inflow) value of $19,800. The company requires a 6.2% rate of return. Round PV to the nearest cent. Round NPV to the nearest whole number.
1) What is the Net Present Value (NPV) of this equipment investment?
Cash Inflows
| Cash Inflows | Payments (Savings) | Residual (Inflow) |
| P/Y = | ||
| C/Y = | ||
| N = | ||
| I/Y = | % | % |
| PV = | $ | $ |
| PMT = | $ | $ |
| FV = | $ | $ |
(If the NPV is negative, enter it as a negative number. If the NPV is zero, enter 0.)
NPV = $ (round to the nearest whole number)
2) Should this equipment purchase be made according to the NPV criterion?
Yes
No
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
