The management of Kunkel Company is considering the purchase of a $29,000 machin

Question

The management of Kunkel Company is considering the purchase of a $29,000 machine that would reduce operating costs by $6,500 per year. At the end of the machine's five-year useful life, it will have zero scrap value. The company's required rate of return is 16% Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables Required 1. Determine the net present value of the investment in the machine Net present value 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? (Any cash outflows should be indicated by a minus sign.) Total Cash Flows Item Cash Flow Years Annual cost saving:s Initial investment Net cash flow 2 value: 10.00 points The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $66,000. The machine would replace an old piece of equipment that costs $17,000 per year to operate. The new machine would cost $8,000 per year to operate. The old machine currently in use is fully depreciated and could be sold now for a scrap value of $29,000. The new machine would have a useful life of 10 years with no salvage value Required Compute the simple rate of return on the new automated bottling machine Choose Numerator Choose Denominator: Simple Rate of Return = = | Simple rate of return

Explanation / Answer

1) Net present value = (6500*3.274)-29000 = -7719

Difference :

Note : Only one question in one time as per chegg policy

Items Cash flow Years Total cash flow Annual cost saving 6500 5 32500 Initial investment -29000 1 -29000 Net cash flow 3500

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