Question Two The Zone Company is The machine is expected to improve productivity

Question

Question Two The Zone Company is The machine is expected to improve productivity and $250,000 per year for 7 years. It will have no salvage value minimum rate of return of 12 percent on this type of for this problem.) 000 the purchase of a new machine at a cost of $1,040. thereby increase cash inflows by requires taxes capital investment. (Ignore income Required 1. Determine the net present value (NPV) of the investment proposal. (The PV annuity factor for 12%, 7 years is 4.564.) 2. What is the estimated payback period for the proposed investment, under the a that cash inflows occur evenly throughout the year? Round your answer to 2 decimal places

Explanation / Answer

Cash Out Flow :$ 1040000

Cash Inflow; $ 250000 Every year fpr 7 years

Discount rate : 12 %

Present Valuue of Future Cash inflow : $1140939.13

Cash Out Flow :$1040000

Net Gain : $ 100939.13

2) Discounted Payback Period Analysis Discount Rate             12.0% Projected Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Undiscounted Net Cash Flow $ (1,040,000)       $ 223,214       $ 199,298       $ 177,945       $ 158,880       $ 141,857 $ 126,658    $ 113,087 Cumulative Net Cash Flow         (816,786)         (617,487)         (439,542)         (280,663)         (138,806)       (12,148)       100,939 Payback Period 6.11 Actual Number of Years

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