Check my work 2 The management of Kunkel Company is considering the purchase of

Question

Check my work 2 The management of Kunkel Company is considering the purchase of a $35,000 machine that would reduce operating costs by $8,500 per year. At the end of the machine's five-year useful life, it will have zero salvage value. The company's required rate of return is 16%. Click here to view Exhibit 138-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using table. 10 points Required 1. Determine the net present value of the investment in the machine 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? eBook Hint Print References Complete this question by entering your answers in the tabs below Required 1 Required 2 Determine the net present value of the investment in the machine. (Negative amounts should be indicated by a minus sign. Round your final answer to the nearest whole dollar amount. Use the appropriate table to determine the discount factor(s).) Ne t present value

Explanation / Answer

Now 1 2 3 4 5 Purchase of machine -35000 Reduced operating costs 8500 8500 8500 8500 8500 Total cash flows -35000 8500 8500 8500 8500 8500 Discount factor (11%) 1 0.862 0.743 0.641 0.552 0.476 Present value -35000 7327 6316 5449 4692 4046 Net present value -7171 2 Cash Flow Years Total Cash Flows Annual cost savings 8500 5 42500 Initial investment -35000 1 -35000 Net cash flow 7500

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