What is the net present value for an investment in a piece of equipment of $400,

Question

What is the net present value for an investment in a piece of equipment of $400,000? Use the present value factors from Exhibit 1 on page 1147 for a desired rate of return of 10% for 5 years and the following information: Year 1 Income from Operations of $100,000 with Net Cash Flow of $180,000; Year 2 Income from Operations of $40,000 with Net Cash Flow of $120,000; Year 3 Income from Operations of $20,000 with Net Cash Flow of $100,000; Year 4 Income from Operations of $10,000 with Net Cash Flow of $90,000; Year 5 Income from Operations of $10,000 with Net Cash Flow of $90,000

Explanation / Answer

Hi,

I am sorry for my previous post. I skipped that you require calculation with the use of tables. Please find the answer as follows:

NPV = - 400000 + 180000*.909 + 120000*.826 + 100000*.751 + 90000*683+ 90000*.621 = 55200

Thanks.

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