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The management of Kunkel Company is considering the purchase of a $31,000 machine that would reduce operating costs by $8,500 per year. At the end
The management of Kunkel Company is considering the purchase of a $31,000 machine that would reduce operating costs by $8,500 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%.
Exercise 8-2 Net Present Value Method IL08-2] The management of Kunkel Company is considering the purchase of a $31,000 machine that would reduce operating costs by $8,500 per year. At the end of the machine's five-year useful life, it will have zero scrap value. The company's required rate of return is 13% Click here to view Exhibit 8B-1 and Exhibit 8B-2, to determine the appropriate discount factor(s) using table Required: 1. Determine the net present value of the investment in the machine Net present value 1,104 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.) Total Cash Years Item Cash Flow Flows 5 S 42,500 8,500 Annual cost savings 0x 0 (31,000 Initial investment S 42,500 Net cash flow *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deductedStep by Step Solution
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