The management of Kunkel Company is considering the purchase of a $39,000 machine that would reduce operating costs by $9,000 per year. At the end of the machine’s five-year useful life, it will have zero salvage value. The company’s required rate of return is 11%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. Required: 1. Determine the net present value of the investment in the machine.
The management of Kunkel Company is considering the purchase of a $39,000 machine that would reduce operating costs by $9,000 per year. At the end of the machine’s five-year useful life, it will have zero salvage value. The company’s required
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table.
Required:
1. Determine the
NET PRESENT VALUE
Net Present Value is one of the important Capital Budgeting Technique.
Net Present Value help to estimate whether such Project is Acceptable or not.
Net Present Considered Time Value of Money.
Net Present Value is Computed :—
= Initial Investment - Present Value of Annual Cash Inflow
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