Exercise 11-2 Net Present Value Method [LO11-2]

The management of Kunkel Company is considering the purchase of a $33,000 machine that would reduce operating costs by $8,500 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 16%.

Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.

Required:

1.

Determine the net present value of the investment in the machine.

	Net present value: