machine thot costs $18,O0D The machine would save about $4,000 per year over t o
ID: 2538178 • Letter: M
Question
machine thot costs $18,O0D The machine would save about $4,000 per year over t of eturn ignore income taxes in this problem.) Beaver Corporation s investigating the purchase of a new threoding salvage vakie method of threadrg component parts, and would have nreading component parts and would have o saivage value of about $3.000 inG years when the mactre wouie be replaced The company's required is 12% The machine's net present value is closest to lick here to view Exhibit 138-1 and ExthIot 1382 to determine the appropnate discount foctorts) using tab O $8000 O s35) O ST.000 O $1556Explanation / Answer
Solution: Answer is 2nd option $(35) Working Notes: Using 13B-1 Exhibit Year Cash flow PVF @ 12% 0 ($18,000) 1 ($18,000) 1 $4,000 0.893 $3,572 2 $4,000 0.797 $3,188 3 $4,000 0.712 $2,848 4 $4,000 0.636 $2,544 5 $4,000 0.567 $2,268 6 $4,000 0.507 $2,028 6 $3,000 0.507 $1,521 Net Present Value ($31) Which is closet to ($35) Notes: Life of project is assumed of 6 years as it salvage value at end of 6th year is given Exhibit 13B-2 is discounting factor for present value of annuity. Please feel free to ask if anything about above solution in comment section of the question.
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