The management of Kunkel Company is considering the purchase of a $22,000 machine that would reduce operating costs by $5,000 per year. At the end of the machineâs five-year useful life, it will have zero scrap value. The companyâs required rate of return is 16%.
Required: 1. Determine the net present value of the investment in the machine.
2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine?
Item Cash Flow Years Total Cash Flows Annual Cost Savings $ Initial Investment $ Net Cash Flow $
The management of Kunkel Company is considering the purchase of a $22,000 machine that would reduce operating costs by $5,000 per year. At the end of the machineâs five-year useful life, it will have zero scrap value. The companyâs required rate of return is 16%.
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| 1. | Determine the net present value of the investment in the machine.
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Related questions
The management of Kunkel Company is considering the purchase ofa $24,000 machine that would reduce operating costs by $6,000 peryear. At the end of the machineâs five-year useful life, it willhave zero scrap value. The companyâs required rate of return is13%.
Required:
1. Determine the net present value of the investment in themachine.
| 2. | What is the difference between the total, undiscounted cashinflows and cash outflows over the entire life of the machine? |
