A company can buy a machine that is expected to have a three-year life and a $31

Question

A company can buy a machine that is expected to have a three-year life and a $31,000 salvage value. The machine will cost $1,804,000 and is expected to produce a $201,000 after-tax net income to be received at the end of each year. If a table of present values of 1 at 12% shows values of 0.8929 for one year, 0.7972 for two years, and 0.7118 for three years, what is the net present value of the cash flows from the investment, discounted at 12%?

A.) $120,370

B.) $585,811

C.) $631,382

D.) $707,177

E.) $1,924,370

Please show the steps to solving this problem! **

Explanation / Answer

2.4019 (Pvaf

cumulative for 3 years)

Note; as per the values given Npv is calculated ..plz make sure values are correct or not to match the options.

Particular amount $ pvf@12% i.e 1/(1.12) present value Year0 machine purchased 1804000 1 (1804000) Year 1- 3 cash inflows 201000

2.4019 (Pvaf

cumulative for 3 years)

482782 Year 3 salvage value 31000 .7118 22066 NPV (1299152)

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