solve: Sensitivity analysis: Boulder Creek Industries

Boulder Creek Industries is considering an investment in equipment based on the following estimates:

Line Item Description Value

Cost of equipment $$3,000,000$

Residual value $$200,000$

Useful life $10$ years

Determine the net present value of the equipment, assuming a desired rate of return of $15\%$ and annual net cash flows of $$400,000,$ $$600,000,$ and $$800,000.$ Use the present value tables $($Exhibits $2$ and $5)$ provided in the chapter in determining your answer. If required, use the minus sign to indicate a negative net present value.