Branden Secure | https://newconnect.mheducation.com/flow/connect.html a Help Sav
ID: 2544766 • Letter: B
Question
Branden Secure | https://newconnect.mheducation.com/flow/connect.html a Help Save&Exit; The following present value factors are provided for use in this problem. Present Value of $1 at 8% 0.9259 0.8573 0.7938 .7358 Present Value of an Annuity of $1 at 8% 8.9259 1.7833 2.5771 3.3121 Periods Xavier Co. wants to purchase a machine for $37,300 with a four year life and a $1,000 salvage value. Xavier requires an 8% return on investment. The expected year-end net cash flows are $12,300 in each of the four years. What is the machine's net present value? Multiple Choice $4,174. $3,439. $41,474. S(4174) $(3,439).Explanation / Answer
Present value of inflows=$12300*Present value of annuity factor(8%,4)+$1000*Present value of discounting factor(8%,4)
=$12300*3.3121+$1000*0.7350
=$41473.83
NPV=Present value of inflows-Present value of outflows
=$41473.83-$37300
which is equal to
=$4174(Approx).