QS 24-14 Net present value LO P3 A company is considering investing in a new mac

Question

QS 24-14 Net present value LO P3 A company is considering investing in a new machine that requires a cash payment of $69,952 today. The machine will generate annual cash flows of $18,453 for the next three years. Assume the company uses an 6% discount rate. Compute the net present value of this investment (FV of S 1. PV of $1, FVA of $1 and PVA of S1) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign.) Chart Values are Based on: ash Flow Select Chart Amount X | PV Factor Present Value Annual cash flow Net present value

Explanation / Answer

n= 3 i= 6% Annual cash flow Present value of Annual cash flow 18453 X 2.673 = 49325 Initial investment 69952 Net present value -20627

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