Cost of the machine 514,800 life 3 years salvage value 79,200. Annual Savings fr
ID: 2717851 • Letter: C
Question
Cost of the machine 514,800 life 3 years salvage value 79,200. Annual Savings from the machine 158,400 pre-tax. Tax 32% return rate 12% . What is the NPV ? Possible answers a) -124 b) 101 c) 96 d) 85 e) 134 Cost of the machine 514,800 life 3 years salvage value 79,200. Annual Savings from the machine 158,400 pre-tax. Tax 32% return rate 12% . What is the NPV ? Possible answers a) -124 b) 101 c) 96 d) 85 e) 134 Cost of the machine 514,800 life 3 years salvage value 79,200. Annual Savings from the machine 158,400 pre-tax. Tax 32% return rate 12% . What is the NPV ? Possible answers a) -124 b) 101 c) 96 d) 85 e) 134Explanation / Answer
Answer: Calculation of the NPV:
Depreciation=(514800-79200)/3 years
=$145200
Particulars Time P.V.F (12%) Amount ($) PV ($) Cost of machine 0 1 -514800 -514800 Annual savings after tax 1 0.8928 154176 137648.3328 2 0.7972 154176 122909.1072 3 0.7117 154176 109727.0592 Salvage value after tax (79200*(1-0.32)) 3 0.7117 53856 38329.3152 NPV -106186.1856