Question

The Pantalone Company, Inc., is considering purchasing a new grinding machine. The initial outlay for the machine is $185,000. The required rate of return for Pantalone Company, Inc., is 11.5%. The expected cash flows are as follows: Year Expected After-tax Cash Flow 1 $20,000 2 $40,000 3 $70,000 4 $70,000 5 $60,000 6 $40,000 Calculate the Net Present Value of the investment Group of answer choices

Answer 1

Net present value $16,531.62

Step-by-step explanation:

The computation of the net present value is shown below:

Year Cash inflows Discount rate Present value

0 -185000 1 -185000

1 20000 0.896860987 17937.21973

2 40000 0.804359629 32174.38517

3 70000 0.721398771 50497.91394

4 70000 0.646994413 45289.60891

5 60000 0.580264048 34815.84286

6 40000 0.520416186 20816.64745

Net present value $16,531.62