Marty’s Cranes is considering purchasing a new $275,000 crane. If Marty expects

Question

Marty’s Cranes is considering purchasing a new $275,000 crane. If Marty expects the cash inflows to be $45,000 in the first year, $76,000 in year 2, and $80,0000 in year three, and a cash outflow in year 2 of $50,000, what is the NPV if the cost of capital is 15%. (Round your final response to two decimal places and omit the dollar)

Marty’s Cranes is considering purchasing a new $275,000 crane. If Marty expects the cash inflows to be $45,000 in the first year, $76,000 in year 2, and $80,0000 in year three, and a cash outflow in year 2 of $50,000, what is the NPV if the cost of capital is 15%. (Round your final response to two decimal places and omit the dollar)

Explanation / Answer

Year cash flow PVF(15%,n year) present value

0 -275000 1 -275000

2 -50000 0.756 -37800

1 45000 0.870 39150

2 76000 0.756 57456

3 800000 0.658 526400

NPV = Present value of cash inflow - present value of cash outflow

= $(39150 + 57456 +526400 ) - $(275000 + 37800)

   = $623006 - $312800

   = $310206

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