Question
Penny Worth Cleaners, a chain of dry cleaning stores, has the opportunity to invest in one of two dry cleaning machines. Machine A has a
Penny Worth Cleaners, a chain of dry cleaning stores, has the opportunity to invest in one of two dry cleaning machines. Machine A has a four-year expected life and a cost of $27,530. It will cost an additional $6,490 to have the machines delivered and installed, and the expected residual value at the end of four years is $3,880. Machine B has a four-year expected life and a cost of $56,160. It will cost an additional $6,800 to have the machine delivered and installed, and the expected residual value at the end of four years is $5,830. Penny Worth has a required rate of return of 14 percent. Additional cash flows related to the machines are as follows:
Ignoring taxes, determined the net present value of investing in Machine A. (Round present value factor calculations to 4 decimal places, e.g. 1.2151 and final answer to 0 decimal places, e.g. 125. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Net present value $______________
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