Dynomax

is considering buying a new water treatment system for its plant in Austin, Texas. The investment proposal passed the initial screening tests (payback and accounting rate of return) so the company now wants to analyze the proposal using the discounted cash flow methods. The water treatment system costs

1.	Compute the water treatment system's NPV.
2.	Find the water treatment system's IRR (exact percentage is not required).
3.	Should Dynomax buy the water treatment system? Why?

$48,000,

has a

five-year

life, and has no residual value. The estimated net cash inflows from environmental cleanup savings are

$13,000

per year over its life. The company's required rate of return is

16%.

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(Click the icon to view the Present Value of $1 table.)

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(Click the icon to view the Present Value of Annuity of $1 table.)Read the requirements

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Question content area bottom

Part 1

Requirement 1. Compute the water treatment system's NPV. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative NPV.)

		Net Cash	Annuity PV Factor	Present
Years		Inflow	(i=16%, n=5)	Value
1 - 5	Present value of annuity
0	Investment
	Net present value