A machine costs $980,000 to purchase and will provide $200,000 ayear in benefits

Question

A machine costs $980,000 to purchase and will provide $200,000 ayear in benefits. The company plans to use the machine for 13years, and then will sell the machine for scrap, receiving $20,000.The company interest rate is 12%. Which one of the followingstatements is correct:

(a)        NPW  = $980,000 + $200,000 (P/A,12%,13) + $20,000 (P/F,12%,13)

(b)        NPW   =-$980,000 + $200,000 (P/A,12%,13) + $20,000 (P/F,12%,13)

(c)        NPW   =-$980,000 + $200,000 (P/A,12%,13) - $20,000 (P/F,12%,13)

(d)        NPW  = $980,000 - $200,000 (P/F,12%,13) - $20,000(P/A,12%,13)

Explanation / Answer

13 years

Purchsing Cost of theMachine $980,000 Annual benefits per year $200,000 Life of the Machine

13 years

Salvage Value of theMahince $20,000 Interest Rate 12% Net PresentWorth (NPW) = -$980,000 + $200,000 (P/A12%,13) + $20,000 (P/F12%,13)

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

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