Question
Carlin Company, which uses net present value to analyze investments, requires a 8% minimum rate of return. A staff assistant recently calculated a $800,000 machine's
Carlin Company, which uses net present value to analyze investments, requires a 8% minimum rate of return. A staff assistant recently calculated a $800,000 machine's net present value to be $96,400, excluding the impact of straight-line depreciation.
FV of 1 (i = 8%, n = 6):1.587
FV of a series of $1 cash flows (i = 8%, n = 6):7.336
PV of $1 (i = 8%; n = 6):0.630
PV of a series of $1 cash flows (i = 8%, n = 6):4.623
If Carlin ignores income taxes and the machine is expected to have a six-year service life, the correct net present value of the machine would be:
Multiple Choice
- $96,400.
- $302,700.
- $765,500.
- $196,400.
- $(15,600).
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started