Quinn Industries is considering the purchase of a machine that would cost $380,0

Question

Quinn Industries is considering the purchase of a machine that would cost $380,000 and would last for 9 years. At the end of 9 years, the machine would have a salvage value of $95,500. The machine would reduce labor and other costs by $76,000 per year. The company requires a minimum pretax return of 14% on all investment projects. (Ignore income taxes.) Required: Provide your Excel input and the final net present value amount you calculated. Required: Input the required variables and the computed internal rate of return.

  Nper

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  PV

Explanation / Answer

Particulars Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Undiscounted Net Cash Flow      $ (380,000)         $ 76,000         $ 76,000         $ 76,000         $ 76,000         $ 76,000     $ 76,000      $ 76,000         $ 76,000      $ 171,500 Discount Rate             14.0% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Discounted Cash Flow      $ (380,000)         $ 66,667         $ 58,480         $ 51,298         $ 44,998         $ 39,472     $ 34,625      $ 30,372         $ 26,642        $ 52,738 Discount rate 14% Total Present Value of future cash inflow       $ 405,291 Total Cash Outflow in Year 0       $ 380,000 Net Gain/ Loss         $ 25,291

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