The management of Opry Company, a wholesale distributor of suntan products, is c
ID: 2381669 • Letter: T
Question
The management of Opry Company, a wholesale distributor of suntan products, is considering the purchase of a $33,000 machine that would reduce operating costs in its warehouse by $6,000 per year. At the end of the machine
The management of Opry Company, a wholesale distributor of suntan products, is considering the purchase of a $33,000 machine that would reduce operating costs in its warehouse by $6,000 per year. At the end of the machine
The management of Opry Company, a wholesale distributor of suntan products, is considering the purchase of a $33,000 machine that would reduce operating costs in its warehouse by $6,000 per year. At the end of the machines 8-year useful life, it will have no scrap value. The companys required rate of return is 12%. (Ignore income taxes.) Click here to view Exhibit 13B-2, to determine the appropriate discount factor(s) using table. Determine the net present value of the investment in the machine. (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.) What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? (Omit the "$" sign in your response.)Explanation / Answer
Hi,
Please find the answer as follows:
Part 1:
NPV = -33000 + 6000*PVIFA(12%,8) = -33000 + 6000*4.968 = -3192
Part 2:
Net cash flow = 6000*8 - 33000 = 15000
Thanks.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.