Maersk Metal Stamping is analyzing a special investment project. The project wil

Question

Maersk Metal Stamping is analyzing a special investment project. The project will require the purchase of two machines for $25,000 and $4,000 (both machines are required). The total residual value at the end of the project is $1, 200. The project will generate cash inflows of $14,000 per year over its 12 - year life. If Maersk requires a 6% return, what is the net present value (NPV) of this project? (The present value of annuity for this scenario is 8.384 and the present value is 0.497.) $47,842 $88,972 $88,376 $46,838

Explanation / Answer

NPV

= ($25000 + $4000) + $14000 * PVIFA 6%,12 PERIODS + $1200 * PVIF 6%,12 PERIODS

= ($29000) + $14000 * 8.384 + $1200 * 0.497

= ($29000) + $117376 + $596

= $88972

ANSWER OPTION B

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