Landrys tool supply corporation is considering purchasing a machine.

20 24 36 820 .788 .699 .742 .700 585 377 310 173 312 247 123 215 .158 .063 149 102 032 104 .066 017 .061 .035 .007 026 .013 .001 Ex. 26.4 Landry's Tool Supply Corporation is considering purchasing a machine that costs $100,000 and will produce annual cash flows of $40,000 for five years. The machine is expected to be sold at the end of five years for $12,000. What is the net present value of the proposed investment? Landry's requires a 15 percent return on all capital investments. EXHIBIT 26-4 Present Value of a $1 Annuity Receivable Each Period for n Periods Present Value of $1 to Be Received Periodically for n Periods Number of Discount Rate Periods % 1% 17% 5% 6% 8% 10% 12% 15% 20% 1 0.990 1.970 100,000 Cost of Investment 40,000 Annual Cash Flows for 5 years 12,000 Salvage Value (Sold at end of 5 years) 15% Required Rate of Return 15%, 5 year factor of an annuity 15%, 5 year factor of a $1 2 3 4 5 2.941 3.902 6 7 8 9 10 20 24 36 0.985 1.956 2.912 3.854 4.783 5.697 6.598 7.486 8.361 9.222 17.169 20.030 27.661 4.853 5.795 6.728 7652 8.566 9.471 18.046 21.243 30.108 0.952 1.859 2.723 3.546 4.329 5.076 5.786 6.463 7.108 7.722 12.462 13.799 16.547 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 11.470 12.550 14.621 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 6.247 6.710 9.818 10.529 11.717 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 8.514 8.985 9.677 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 7.469 7.784 8.192 0.870 1.626 2.283 2.855 3.352 3.784 4.160 4.487 4.772 5.019 6.259 6.434 6.623 PV of Cash Flows PV of Sales Proceeds Total PV of future Cash Flows Cost of Investment 40,052 Net Present Value 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 4.870 4.937 4.993