The management of Kunkel Company is considering the purchase of a $20,000 machine that would reduce operating costs by $5,000 per year. At the end of the machines five-year useful life, it will have zero scrap value. The companys required rate of return is 13%.

Required:

1.

Determine the net present value of the investment in the machine

Net Present Value =

2.	What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? (Any cash outflows should be indicated by a minus sign.) Item Cash Flow Years Total Cash Flows Annual Cost Savings Initial Investment Net cash flow