1 answer

The following present value factors are provided for use in this problem. Periods Present Value of...

Question:

The following present value factors are provided for use in this problem. Periods Present Value of $1 at 8% 0.9259 0.8573 0.7Multiple Choice Ο $2,702. Ο $1,820. Ο $39,302. Ο $(2,702). Ο $(1,820).

The following present value factors are provided for use in this problem. Periods Present Value of $1 at 8% 0.9259 0.8573 0.7938 0.7350 Present Value of an Annuity of $1 at 88 0.9259 1.7833 2.5771 3.3121 Xavier Co. wants to purchase a machine for $36,600 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 $11,600 in each of the four years. What is the machine's net present value?
Multiple Choice Ο $2,702. Ο $1,820. Ο $39,302. Ο $(2,702). Ο $(1,820).

Answers

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=11600/1.08+11600/1.08^2+11600/1.08^3+11600/1.08^4+1200/1.08^4

=11600[1/1.08+1/1.08^2+1/1.08^3+1/1.08^4]+1200/1.08^4

=(11600*3.3121)+(1200*0.7350)

=39302.36

NPV=Present value of inflows-Present value of outflows

=39302.36-36600

=$2702(Approx).

.

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