Please help me solve these two problems. (label the answers) Show all work so I

Question

Please help me solve these two problems. (label the answers) Show all work so I can solve the actual problem. Thank you in advance!

The management of Kunkel Company is considering the purchase of a $26,000 machine that would reduce operating costs by $6,500 per year. At the end of the machine's five-year useful life, it will have zero scrap value. The company's required rate of return is 16% Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables Required 1. Determine the net present value of the investment in the machine. (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s).) 4 Now Purchase of machine Reduced operating costs Total cash flows Discount factor (12%) Present value Net present value 0 S 0 S 0 S 0 S 0 S

Explanation / Answer

1 Item 0 1 2 3 4 5 Purchase of Machine (26,000) Reduced Operating Costs 6,500 6,500 6,500 6,500 6,500 Total Cash Flows (26,000) 6,500 6,500 6,500 6,500 6,500 Discount factor (12%) 1.00 0.89 0.80 0.71 0.64 0.57 Present Value (26,000) 5,804 5,182 4,627 4,131 3,688 Net Present Value           (2,569) 2 Item Cash Flow Years Total Cash Flows Annual Cost Savings 6500 5 32500 Initial Investment -26000 1 -26000 Net Cash Flow 6500

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