Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (including depreciation) totaling $164,000 per year for net operating income of $36,000. The firm uses straight-line depreciation with no residual value for all depreciable assets. Management requires a minimum after-tax rate of return of 10% on all investments. What is the net present value (NPV) of the investment? # of years 1 234567 000 8 9 10 at 10% PV of $1 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 O-$363.936 O $63,936 O$163,524 O $136,476 at 10% PV of an annuity 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145
Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (including depreciation) totaling $164,000 per year for net operating income of $36,000. The firm uses straight-line depreciation with no residual value for all depreciable assets. Management requires a minimum after-tax rate of return of 10% on all investments. What is the net present value (NPV) of the investment? # of years 1 234567 000 8 9 10 at 10% PV of $1 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 O-$363.936 O $63,936 O$163,524 O $136,476 at 10% PV of an annuity 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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subject:- account
Transcribed Image Text:Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of
$200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead
(including depreciation) totaling $164.000 per year for net operating income of $36,000. The firm uses straight-line depreciation
with no residual value for all depreciable assets. Management requires a minimum after-tax rate of return of 10% on all
investments. What is the net present value (NPV) of the investment?
# of years
1
234567
000
8
9
10
at 10%
PV of $1
0.909
0.826
0.751
0.683
0.621
0.564
0.513
0.467
0.424
0.386
O-$363.936
O $63,936
O$163,524
O $136,476
at 10%
PV of an annuity
0.909
1.736
2.487
3.170
3.791
4.355
4.868
5.335
5.759
6.145
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