Present Value Tables

Periods	PV of $1 at 10%	PV of $1 at 12%
1	0.909	0.893
2	0.826	0.797
3	0.751	0.712
4	0.683	0.636
5	0.621	0.567

Minimum annual revenue from machine operation	$1,250,000
Maximum operating cost (before depreciation) as percentage of machine revenue	50%
Tax rate	40%
Useful life (for straight-line depreciation)	5 years
Required rate of return	10%
Sale proceeds at end of Year 4	$500,000

1. Rodin identified suitable equipment costing $2,000,000. What is the NPV of the equipment acquisition?

3. If CFO Dodhia changes the required rate of return to 12%, what is the NPV of the purchase?