Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return F

Question

Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return

Follow the format shown in Exhibit 12B.1 and Exhibit 12B.2 as you complete the requirement below.

Blaylock Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $900,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow:

Required:

Compute the investment's Net Present Value, assuming a required rate of return of 10 percent. Round present value calculations and your final answer to the nearest dollar.
NPV = $

Year      Cash Revenues      Cash Expenses 1 $1,600,000 $1,100,000 2 1,600,000 1,100,000 3 1,600,000 1,100,000 4 1,600,000 1,100,000 5 1,600,000 1,100,000

Explanation / Answer

NPV = PV of all cash inflows - PV of all cash outflows

( 1600000 - 1100000 ) * PVIFA ( 10 % , 5 years ) - $ 900000

( $ 500000 * 3.7908 ) - $ 900000 =

$ 995400 ( positive )

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

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