QUESTION 9

Cascade Corporation is considering the purchase of a new machine costing $169,000. The machine would generate net cash inflows of $43,690 per year for 5 years. At the end of 5 years, the machine would have no salvage value. Cascades cost of capital is 14 percent. Cascade uses straight-line depreciation. The present value factors of annuity of $1.00 for different rates of return are as follows:

Period

12%

14%

16%

18%

4

3.03735

2.91371

2.79818

2.69006

5

3.60478

3.43308

3.27429

3.12717

6

4.11141

3.88867

3.68474

3.49760

The proposals net present value is:

$18,921

$(49,450)

$(19,009)

$1,070