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Brown Company is considering purchasing a machine that would cost $320,000 and would last for 6 years. At the end of 6 years, the machine would have a salvage value of $50,000. The machine would provide annual cost savings of $75,000. The company requires a rate of return of 11% on all investment projects. What is the net present value of the proposed project? (Select the answer that is closest to your calculations.) Present value tables are provided below. Present Value of $1 Table (Exhibit 11B-1) (Partial table) Periods 4% 5% 6% 7% 8% 9% 10% 11 12% 13% 14% 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 6. 7 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.400 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0.270 8 10 11 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 0.261 0.237 0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.286 0.257 0.231 0.208 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 0.204 0.182 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.232 0.205 0.181 0.160 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 0.160 0.140 12 13 14 15 12345

Brown Company is considering purchasing a machine that would cost $320,000 and would last for 6 years. At the end of 6 years, the machine would have a salvage value of $50,000. The machine would provide annual cost savings of $75,000. The company requires a rate of return of 11% on all investment projects. What is the net present value of the proposed project? (Select the answer that is closest to your calculations.) Present value tables are provided below. Present Value of $1 Table (Exhibit 11B-1) (Partial table) Periods 4% 5% 6% 7% 8% 9% 10% 11 12% 13% 14% 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 6. 7 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.400 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0.270 8 10 11 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 0.261 0.237 0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.286 0.257 0.231 0.208 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 0.204 0.182 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.232 0.205 0.181 0.160 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 0.160 0.140 12 13 14 15 12345

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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### Net Present Value (NPV) Calculation for Machine Investment **Scenario:** Brown Company is considering purchasing a machine that would cost $320,000 and would last for 6 years. At the end of 6 years, the machine would have a salvage value of $50,000. The machine would provide annual cost savings of $75,000. The company requires a rate of return of 11% on all investment projects. **Problem Statement:** What is the net present value (NPV) of the proposed project? Use the present value tables provided below to assist in your calculations. **Present Value Table:** The table below provides the present value of $1 for various interest rates over different periods. Find the appropriate factors for the 11% rate of return over 6 periods. | Periods | 4% | 5% | 6% | 7% | 8% | 9% | 10% | 11% | 12% | 13% | 14% | |---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------| | 1 | 0.962 | 0.952 | 0.943 | 0.935 | 0.926 | 0.917 | 0.909 | 0.901 | 0.893 | 0.885 | 0.877 | | 2 | 0.925 | 0.907 | 0.890 | 0.873 | 0.857 | 0.842 | 0.826 | 0.812 | 0.797 | 0.783 | 0.769 | | 3 | 0.889 | 0.864 | 0.840 | 0.816 | 0.794 | 0.772 | 0.751 | 0.731 | 0.712 | 0.693 | 0.675 | | 4 | 0.855 | 0.823 | 0.792 | 0.763 | 0.735 | 0.708
Transcribed Image Text:### Net Present Value (NPV) Calculation for Machine Investment **Scenario:** Brown Company is considering purchasing a machine that would cost $320,000 and would last for 6 years. At the end of 6 years, the machine would have a salvage value of $50,000. The machine would provide annual cost savings of $75,000. The company requires a rate of return of 11% on all investment projects. **Problem Statement:** What is the net present value (NPV) of the proposed project? Use the present value tables provided below to assist in your calculations. **Present Value Table:** The table below provides the present value of $1 for various interest rates over different periods. Find the appropriate factors for the 11% rate of return over 6 periods. | Periods | 4% | 5% | 6% | 7% | 8% | 9% | 10% | 11% | 12% | 13% | 14% | |---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------| | 1 | 0.962 | 0.952 | 0.943 | 0.935 | 0.926 | 0.917 | 0.909 | 0.901 | 0.893 | 0.885 | 0.877 | | 2 | 0.925 | 0.907 | 0.890 | 0.873 | 0.857 | 0.842 | 0.826 | 0.812 | 0.797 | 0.783 | 0.769 | | 3 | 0.889 | 0.864 | 0.840 | 0.816 | 0.794 | 0.772 | 0.751 | 0.731 | 0.712 | 0.693 | 0.675 | | 4 | 0.855 | 0.823 | 0.792 | 0.763 | 0.735 | 0.708
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