Question

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 $45,899 today. The machine will generate annual cash flows of $18,453 for the next three years. rev: 12_17_2019_QC_CS-194037 QS 26-14 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

$1,656.2263

Step-by-step explanation:

The computation of the net present value is shown below:

= Cash inflows of the project - cash outflows or initial investment

= $18,453 × PVIFA factor for 3 years at 8% - $45,899

= $18,453 × 2.5771 - $45,899

= $47,555.2263 - $45,899

= $1,656.2263

Refer to the PVIFA factor table for the discounting factor