Net Present Value For discount factors use Exhibit 128-1 and Exhibit 128-2. Talmage Inc. has just completed development of a new printer. The new product is expected to produce annual revenues of $2,700,000. Producing the printer requires an investment in new equipment costing $2,880,000. The printer has a projected life cycle of 5 years. After 5 years, the equipment can be sold for $360,000. Working capital is also expected to decrease by $360,000, which Talmage will recover by the end of the new product's life cycle. Annual cash operating expenses are estimated at $1,620,000. The required rate of return is 8%. Required: 1. Prepare a schedule of the projected annual cash flows. Year Item Cash Flow 2,880,000 0 Equipment Working capital 360,000 Total 3,240,000 1-4 Revenues 2,700,000 Operating expenses 1,620,000 Total 1,080,000 5 Revenues 2,700,000 Operating expenses 1,620,000 Salvage 360,000 Recovery of working capital Total 360,000 1,800,000 2. Calculate the NPV usinn.only discount factors from Fxhibit 128.1 Check My Work 1 more Check My Work uses remaining Previous Next > eBook Operating expenses Total 5 Revenues Operating expenses Salvage Recovery of working capital Total Show Me How 2,700,000 1,620,000 1,080,000 2,700,000 1,620,000 360,000 360,000 1,800,000 2. Calculate the NPV using only discount factors from Exhibit 128.1 3. Calculate the NPV using discount factors from both Exhibits 128.1 and 128.2 Feedback Check My Work 1. Select the description of the cash flow in the Item column and enter the amount of each cash increase or decrease in the Cash Flow column. Amou discounted and amounts for years 1-4 are per year amounts, rather than the sum of years 1-4. 2. Use only Exhibit 128-1 to calculate NPV which means treat each year separately and discount each year using the present value of a single amount 3. Use Exhibit 12B-1 for Year 5 and Exhibit 128-2 for Years 1-4. Cash flows are the same in Years 1-4 so the annuity table can be used. The calculatio produce the same NPV. Review the "How to Assess Cash Flows and Calculate Net Present Value" example in the text for help with #3.