Quinn Industries is considering the purchase of a machine that would cost $440,0
ID: 2436314 • Letter: Q
Question
Quinn Industries is considering the purchase of a machine that would cost $440,000 and would last for 8 years. At the end of 8 years, the machine would have a salvage value of $93,500. The machine would reduce labor and other costs by $70,000 per year. The company requires a minimum pretax return of 17% on all investment projects. (Ignore income taxes.) Required Provide your Excel input and the final net present value amount you calculated. (If a variable is not used in the calculation, input a zero (0). Omit the "S" and "%" signs in your response.) Round your answer to the nearest dollar and use a minus sign for negative numbers. Excel input: Rate Nper PMT PV FV Net Present Value (NPV)Explanation / Answer
rate
17%
Year
cash flow
present value of cash flow = cash flow/(1+r)^n r = 17%
nper
8
0
-440000
-440000
pmt
93500
1
70000
59829.06
pv
-440000
2
70000
51135.95
Fv
93500
3
70000
43705.94
NPV
-25689.8
4
70000
37355.5
5
70000
31927.78
6
70000
27288.7
7
70000
23323.68
8
163500
139743.6
NPV
sum of present value of cash flow
-25689.8
rate
17%
nper
8
Year
cash flow
pmt
70000
0
-440000
pv
-440000
1
70000
Fv
93500
2
70000
IRR
8.69%
3
70000
4
70000
5
70000
6
70000
7
70000
8
163500
IRR =Using IRR function in MS excel
8.69%
rate
17%
Year
cash flow
present value of cash flow = cash flow/(1+r)^n r = 17%
nper
8
0
-440000
-440000
pmt
93500
1
70000
59829.06
pv
-440000
2
70000
51135.95
Fv
93500
3
70000
43705.94
NPV
-25689.8
4
70000
37355.5
5
70000
31927.78
6
70000
27288.7
7
70000
23323.68
8
163500
139743.6
NPV
sum of present value of cash flow
-25689.8
rate
17%
nper
8
Year
cash flow
pmt
70000
0
-440000
pv
-440000
1
70000
Fv
93500
2
70000
IRR
8.69%
3
70000
4
70000
5
70000
6
70000
7
70000
8
163500
IRR =Using IRR function in MS excel
8.69%
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