Total Points: 10 Due date: December 05, 2017 I. (2.5 points) Find the present wo
ID: 2587537 • Letter: T
Question
Total Points: 10 Due date: December 05, 2017 I. (2.5 points) Find the present worth of the following cash flow diagram if,-5%. 120 120 120 50 50 50 0123 2. (2.5 points) ABC Inc. must purchase a welding machine. The following is known about the machine and about possible cash flows. p .30 p:.40 .30 First cost Annual savings Annual costs Actual salvage value 40,00040,000 $40,000 8,000 6,000 6,500 2,000 12,000 4,000 5,000 8,000 5,000 The machine is expected to have a useful life of 8 years. The company has a MARR of 7%. Determine the NPW of the machine.Explanation / Answer
1.
It is mentioned that that the company will start getting cash from 4th year and the cost of capital is 5%
Present Value = Cash flow * PVF@6% of that year
Year
Cash Inflow
PVF @ 6%
Present Value
0
-
-
-
1
-
0.943
-
2
-
0.890
-
3
-
0.840
-
4
50
0.792
39.6
5
120
0.747
89.64
6
50
0.705
35.25
7
120
0.665
79.8
8
50
0.627
31.35
9
120
0.592
71.04
Total
346.68
Present Worth = $346.68
Year
Cash Inflow
PVF @ 6%
Present Value
0
-
-
-
1
-
0.943
-
2
-
0.890
-
3
-
0.840
-
4
50
0.792
39.6
5
120
0.747
89.64
6
50
0.705
35.25
7
120
0.665
79.8
8
50
0.627
31.35
9
120
0.592
71.04
Total
346.68