Can ount è Hear 3 MC Qu. 113 A company can buy a machine that.. Help Save & Ex A
ID: 2578546 • Letter: C
Question
Can ount è Hear 3 MC Qu. 113 A company can buy a machine that.. Help Save & Ex A company can buy a machine that is expected to have a three-year life and a $28,000 salvage value. The machine will cost $1792.000 and is expected to produce St98,000 after-tax net income to be received at the end of each year" a table of present volues of $1 at 12% shows values of 0.8929 for one year, 07972 for two years, and 07118 for three years, what is the net present value of the cash flows from the investment dscounted at 12%? couned a 12x 9 $579.405 Prey 3 of 40 Next >Explanation / Answer
Calculate net present value :
Annual Cash flow = Net income+Depreciation
= 198000+(1792000-28000/3)
Annual cash flow = 786000
Present value of cash inflow = (.8929+.7972+.7118)*786000+(.7118*28000) = 1907823
Present value of cash outflow = 1792000
Net present value = Present value of cash inflow-present value of cash outflow
= 1907823-1792000
Net present value =115823
so answer is a) 115823