Concose Park Department is considering a new capital investment. The following i

Question

Concose Park Department is considering a new capital investment. The following information is available on the investment. The cost of the machine will be $330,000. The annual cost savings if the new machine is acquired will be $85,000. The machine will have a 5-year life, at which time the terminal disposal value is expected to be $32,000. Concose Park Department is assuming no tax consequences. If Concose Park Department has a required rate of return of 11%, which of the following is closest to the present value of the project?

Explanation / Answer

Net present value = Present value of cash inflow-present value of cash outflow

= (85000*3.69590+32000*0.59345)-330000

Net present value = 3142

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