Question

Required information Use the following information for the Quick Study below. [The following information applies to the questions displayed below.] A company is considering investing in a new machine that requires a cash payment of $38,198 today. The machine will generate annual cash flows of $15,904 for the next three years. QS 24-14 Net present value LO P3 Assume the company uses an 8% discount rate. Compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.)

Answer 1

NPV = $2,788.15

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 = $-38,198

Cash flow each year from year 1 to 3 = $15,904

I = 8%

NPV = $2,788.15

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