Question
Following is information on an investment in a manufacturing machine. The machine has zero salvage value. The company requires a 12% return from its investments.
Following is information on an investment in a manufacturing machine. The machine has zero salvage value. The company requires a 12% return from its investments.
Initial investment | $ (200,000) |
---|---|
Net cash flows: | |
Year 1 | 100,000 |
Year 2 | 90,000 |
Year 3 | 75,000 |
Compute this machines net present value. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round all present value factors to 4 decimal places.)
Part 2 of the Same Question
Assume that instead of a zero salvage value, as shown above, the machine has a salvage value of $20,000 at the end of its three-year life. Compute the machines net present value. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round all present value factors to 4 decimal places.)
Net Cash Flow Present Value Factor Present Value of Net Cash Flows Year 1 Year 2 Year 3 Totals Initial investment Net present value Net Cash Flows Present Value Present Value of Net Factor Cash Flows Year 1 Year 2 Year 3 Year 3 salvage value Totals Initial investment Net present valueStep by Step Solution
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