Question
CThe management of Kunkel Company is considering the purchase of a $37,000 machine that would reduce operating costs by $8,000 per year. At the end
CThe management of Kunkel Company is considering the purchase of a $37,000 machine that would reduce operating costs by $8,000 per year. At the end of the machines five-year useful life, it will have zero scrap value. The companys required rate of return is 12%.
Required:
1.Determine the net present value of the investment in the machine. (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s). Insert numbers into blank spots
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.) Insert numbers into blank spots
Item | Cash Flow | Years | Total Cash Flows |
Annual Cost Savings | $ | ||
Initial Investment | $ | ||
Net Cash Flow | $ |
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