NK

You said:

Ivanhoe Corporation is considering buying a brand new machine and has gathered the following data:

Investment

$$104,800$

Estimated life

$5$ years

Estimated annual cash inflows

$$29,900$

Estimated annual cash outflows

$$10,000$

Salvage value for the machine is estimated to be zero.

Click here to view the factor table.

Calculate the net present value of the machine assuming a $8\%$ discount rate. $($If the net present value is negative, use either a negative sign preceding the number eg $-45$ or parentheses eg $(45).$ For calculation purposes, use $5$ decimal places as displayed in the factor table provided, eg$.1\mathrm{.}25124.$ Round present value answer to $0$ decimal places, e$.$g$.125.)$Should the company buy the machine based on your results?

Further investigation reveals that there would be a sales increase of $$7,000$ annually as a result of an increase in quality from the customer's perspective and a cost reduction of $$3,000$ annually as a result of lower warranty claims. Considering these additional facts, calculate the Net Present Value of the machine. $($If the net present value is negative, use either a negative sign preceding the number eg $-45$ or parentheses eg $(45).$ For calculation purposes, use $5$ decimal places as displayed in the factor table provided, e$.$g$.$

$1\mathrm{.}25124.$ Round present value answer to $0$ decimal places, e g$.125.)$

Net Present Value

Should the company buy the machine?