The following present value factors are provided for use in this problem. Period

Question

The following present value factors are provided for use in this problem. Periods Present Value of $1 at 8% Present Value of an Annuity of $1 at 8% 1 0.9259 0.9259 2 0.8573 1.7833 3 0.7938 2.5771 4 0.7350 3.3121 Xavier Co. wants to purchase a machine for $36,700 with a four year life and a $1,100 salvage value. Xavier requires an 8% return on investment. The expected year-end net cash flows are $11,700 in each of the four years. What is the machine's net present value (round to the nearest whole dollar)?

Explanation / Answer

Net Present Value Year Cash flow Pv@8% PV $ 0        -36,700      1.0000    -36,700.00 1         11,700      0.9259      10,833.33 2         11,700      0.8573      10,030.86 3         11,700      0.7938        9,287.84 4         11,700      0.7350        8,599.85 4            1,100      0.7350            808.53 NPV        2,860.42

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