The management of Kunkel Company is considering the purchase of a $25,000 machine that would reduce operating costs by $6,000 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 12%. Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Determine the net present value of the investment in the machine. (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s).)

		Now	1	2	3	4	5
	Purchase of machine
	Reduced operating costs		6,000	6,000	6,000	6,000	6,000
	Total cash flows	0	6000	6000	6000	6000	6000
	Discount factor (12%)	1
	Present value	0	0	0	0	0	0
	Net present value	0

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.)

	cc	Cash Flow	Years	Total Cash Flows
	Annual cost savings	$6,000	5	30,000
	Initial investment			0
	Net cash flow			30,000