Question 6 4 pts XYZ Company is considering the purchase of a new machine. The m

Question

Question 6 4 pts XYZ Company is considering the purchase of a new machine. The machine will cost $200,000 and is expected to last 10 years. However, the machine will need maintenance costing $25,000 at the end of year three and at the end of year six. In addition, purchasing this machine would require an immediate investment of $35,000 in working capital which would be released for investment elsewhere at the end of the 10 years. The machine is expected to have a $15,000 salvage value at the end of 10 years. The machine will be used to generate net cash inflows of $46,000 per year in each of the 10 years. XYZ Company has a cost of capital of 8% and an income tax rate of 40%. Calculate the net present value (NPV) of this machine. If your answer is negative, place a minus sign in front of your answer with no spaces in between (e.g., -1234). Do not use decimals in your answer. You will need to use the present value table factors posted in canvas t° answer this question. T° access these factors, click modules and then scroll to weeks 13 & 14. Click on the link labeled present value table factors. No credit will be awarded for this question using a means other than these table factors to answer this question.

Explanation / Answer

Year Cash Inflow Cash Outflow Total Cash flow Net cash flow after tax@40% Discounting factor@8% Present value 0 -235000 -235000 -235000 1 -235000 1 46000 0 46000 27600 0.93 25556 2 46000 0 46000 27600 0.86 23663 3 46000 25000 21000 12600 0.79 10002 4 46000 0 46000 27600 0.74 20287 5 46000 0 46000 27600 0.68 18784 6 46000 25000 21000 12600 0.63 7940 7 46000 0 46000 27600 0.58 16104 8 46000 0 46000 27600 0.54 14911 9 46000 0 46000 27600 0.50 13807 10 96000 (46000+35000+15000) 0 96000 57600 0.46 26680 Net Present Value -57266

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