Question

The following present value factors are provided for use in this problem. Periods Present Value of $1 at 8% Present Value of an Annuity of $1 at 8% 1 0.9259 0.9259 2 0.8573 1.7833 3 0.7938 2.5771 4 0.7350 3.3121 Xavier Co. wants to purchase a machine for $36,300 with a four year life and a $1,200 salvage value. Xavier requires an 8% return on investment. The expected year-end net cash flows are $11,300 in each of the four years. What is the machine's net present value

Answer 1

$2007.6

Step-by-step explanation:

According to the scenario, computation of the given data are as follow:-

4th Year Cash Flow = Salvage Value + Expected End Year Net Cash Flow

= $1,200 + $11,300

= $12,500

Year Cash flow ($) PVF at 8% Present value ($)

0 36,300 1.000 -36,300

1 11,300 0.9259 10462.67

2 11,300 0.8573 9687.49

3 11,300 0.7938 8969.94

4 12,500 0.7350 9187.5

Net present value 2007.6

According to the analysis, net present value of machine is $2007.6