Exercise 11-1 Net Present Value Method [LO1] The management of Opry Company, a w
ID: 2381877 • Letter: E
Question
Exercise 11-1 Net Present Value Method [LO1]
The management of Opry Company, a wholesale distributor of suntan products, is considering the purchase of a $41,000 machine that would reduce operating costs in its warehouse by $5,800 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 $41,000 machine that would reduce operating costs in its warehouse by $5,800 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 $41,000 machine that would reduce operating costs in its warehouse by $5,800 per year. At the end of the machine's 10-year useful life, it will have no scrap value. The company's required rate of return is 10%. (Ignore income taxes.) to determine the appropriate discount factor(s) using table. Discount factor is 6.145 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, other intermediate calculations and final answer to the nearest whole dollar.)Explanation / Answer
NPV = -41000 + 5800* PVIFA(10%,10)
= -41000 + (5800 * 6.145)
= -5359
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