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Frick Road Paving Corporation is considering an investment in a curb-forming machine. The machine will cost $180,000, will last 10 years, and will have a $30,000 salvage value at the end of 10 years. The machine is expected to generate net cash inflows of $40,000 per year in each of the 10 years. Frick's discount rate is 10%. The net present value of the proposed investment is closest to:

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3 votes

Answer:

$77,348.98

Step-by-step explanation:

The net present value is the present value of after tax cash flows from an investment less the amount invested.

NPV can be calculated using a financial calculator

Cash flow in year 0 = $-180,000

Cash flow each year from year 1 to 9 = $40,000

Cash flow in year 10 = $40,000 + $30,000 = $70,000

I =10%

NPV = $77,348.98

To find the NPV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

I hope my answer helps you

User Ward
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