The management of Opry Company, a wholesale distributor of suntan products, is considering the purchase of a $25,000 machine that would reduce operating costs in its warehouse by $4,000 per year. At the end of the machines 10-year useful life, it will have no scrap value. The companys required rate of return is 12%. (Ignore income taxes.)

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. (Any cash outflows should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate answers to the nearest dollar amount.)

Item	Year(s)	Cash Flow	12% Factor	Present Value of Cash Flows
Annual cost savings	1-10			$0
Initial investment	Now			0
Net present value				$0

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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			$0
Initial investment			0
Net cash flow			$0

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