Basic NPV: No Salvage Value or Taxes

1)

Carrie Rushing is considering the purchase of a new production machine that costs $90,000. She has been told to expect decreased annual operating expenses of $31,000 for four years. At the end of the fourth year, the machine will have no salvage value and will be scrapped.

What is the net present value of the machine if Carrie's cost of capital is 8 percent? Use the time value of money charts for your calculations. (Ignore income taxes.) Round your answer to nearest whole number.

2)

Redwood Orchards Organics purchased a new composter at a cost of $85,000. Annual operating cash inflows are expected to be $39,000 each year for four years. At the end of the composter's useful life, the salvage value of the tractor is expected to be $4,000.

What is the net present value if the cost of capital is 10 percent? Use the time value of money charts for your calculations. (Ignore income taxes.) Round your answer to nearest whole number.

3)

Payback Method

The Happy Day Care Center is considering an investment that will require an initial cash outlay of $352,000 to purchase nondepreciable assets that have a 12-year life. The organization requires a minimum 12-year payback.

Assume that the investment generates equivalent annual cash flow. What minimum amount of annual cash flows must be generated by the project for the company to make the investment? Round your answer to the nearest whole number