NET PRESENT VALUE

Based upon the given information, calculate the net present value of this project and determine if it should be accepted:

Investment in machine...$ 55,000

Net annual cash inflows.. 12,000

Working capital required. 10,000

Salvage value of equipment. 5,000

Life of project.. 7 years

Discount rate 10%

The working capital will be released at the end of the project. Should they buy this machine? SHOW CALCULATIONS FOR FULL CREDIT. You may want to look at the Capital Budgeting Key Concepts document for help.

Here are some present value tables you can use for this problem:

PRESENT VALUE TABLES

Present Value of $1

Periods	4%	6%	8%	10%	12%	14%
4	.855	.792	.735	.683	.636	.592
5	.822	.747	.681	.621	.567	.519
6	.790	.705	.630	.564	.507	.456
7	.760	.665	.583	.513	.452	.400
8	.731	.627	.540	.467	.404	.351
9	.703	.592	.500	.424	.361	.308
10	.676	.558	.463	.386	.322	.270
Present	Value	of	Annuity
Periods	4%	6%	8%	10%	12%	14%
4	3.630	3.465	3.312	3.170	3.037	2.914
5	4.452	4.212	3.993	3.791	3.605	3.433
6	5.242	4.917	4.623	4.355	4.111	3.889
7	6.002	5.582	5.206	4.868	4.564	4.288
8	6.733	6.210	5.747	5.335	4.968	4.639
9	7.435	6.802	6.247	5.759	5.328	4.946
10	8.111	7.360	6.710	6.145	5.650	5.216