The management of Opry Company, a wholesale distributor of suntan products, is c

Question

The management of Opry Company, a wholesale distributor of suntan products, is considering the purchase of a $23,000 machine that would reduce operating costs in its warehouse by $3,600 per year. At the end of the machine's 8-year useful life, it will have no scrap value. The company's required rate of return is 10%. (Ignore income taxes.) Click here to view Exhibit 11B-2. To determine the appropriate discount factor(s) using table. Required: Determine the net present value of the investment in the machine. (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, other intermediate calculations and final answer to the nearest whole dollar.) Net present value what is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? Net cash flow

Explanation / Answer

B) Difference between undiscounted cash flow and cash outflow

28800-23000=$5800

In USD$ Year Cash Flow 10% dis rate Discounted Net cash Flow 1 3600 0.9091 3272.760 2 3600 0.8264 2975.040 3 3600 0.7513 2704.680 4 3600 0.683 2458.800 5 3600 0.6209 2235.240 6 3600 0.5645 2032.200 7 3600 0.5132 1847.520 8 3600 0.4665 1679.400 Total 28800 5.335 19205.640 A) NPV=Discounted cash flow-Initial Investment= 19205.640-23000=-$3794.36 -

B) Difference between undiscounted cash flow and cash outflow

28800-23000=$5800

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.