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ID: 2458491 • Letter: H
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home / study / questions and answers / business / accounting / quinn industries is considering the purchase of ... Your question has been answered! Rate it below. Let us know if you got a helpful answer. Question Quinn Industries is considering the purchase of a machine that would cost $420,000 and would last for 10 years. At the end of 10 years, the machine would have a salvage value of $97,000. The machine would reduce labor and other costs by $82,000 per year. The company requires a minimum pretax return of 14% on all investment projects. (Ignore income taxes.) 19. Required information Required: Compute the net present value of the project by inputting the variables that are entered into your calculator / Excel. (If a variable is not used in the calculation, input a zero (0). Omit the "$" and "%" signs in your response.) Round your answer to the nearest dollar and use a minus sign for negative numbers. Excel / calculator input: Interest Rate (Rate, I, I/YR) % Nper, N PMT $ PV $ FV $ Net Present Value (NPV) $ Required: Compute the internal rate of return of the project by inputting the variables that are entered into your calculator / Excel. (If a variable is not used in the calculation, input a zero (0). Omit the "$" and "%" signs in your response.) Round your answer to one decimal place and use a minus sign for negative numbers. Excel / calculator input: Interest Rate (Rate, I, I/YR) % Nper, N PMT $ PV $ FV $ Internal Rate of Return (IRR) % but i need it on this chart Interest Rate (Rate, I, I/YR) % Nper, N PMT $ PV $ FV
Explanation / Answer
Net Present Value = P.V. of Cash inflow - P.V. of Cash outflow
P.V. of Cash inflow:-
Savings in labor and other costs for each of ten year = $ 82000
Cumulative Present value (P.V.) factor @ 14 % for 10 Years = 5.2161 (approx)
P.V. of Cash inflow:- 82000 * 5.2161 = $ 427720 (approx) (A)
P.V. of salvage value = 97000 * P.V. Factor @ 14 % for tenth year
= 97000 * 0.2697
= $ 26161 (approx) (B)
Total P.V. of Cash inflow = 427720 + 26161 [ (A) + (B) ]
= $ 453881
P.V. of Cash outflow:- $ 420000
Net present value = 453881 - 420000
= $ 33881
Conclusion:- Net present value of project = $ 33881
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