Required 1 Determine the net present value of the investment in the machine

# Required 1 determine the net present value of the

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Required: 1 Determine the net present value of the investment in the machine. purchase 21000 savin 5000 0.12 period 5 purchase 72000 Rduced cost 16000 16000 16000 16000 Total cash flows 72000 16000 16000 16000 16000 Discount Factor would reduce operating costs by \$5,000 per year. At the end of the machine’s five-year useful life, it will have zero scrap value. The company’s required rate of return is 12%.
16000 16000
Year Investment Cash Inflow 1 \$57,000 \$3,000 -\$54,000 2 \$7,000 \$6,000 -\$55,000 55000 12000 3 \$12,000 -\$43,000 43000 \$13,000 4 \$13,000 -\$30,000 \$30,000 \$16,000 5 \$16,000 -\$14,000 \$14,000 \$14,000 6 \$14,000 \$0 \$0 \$12,000 7 \$12,000 \$12,000 -\$12,000 \$10,000 8 \$10,000 \$22,000 -\$22,000 \$9,000 9 \$9,000 \$31,000 -\$31,000 \$9,000 10 \$9,000 \$40,000 -\$40,000 0 -1.00 The management of Unter Corporation, an architectural design firm, is considering an investment with the following cash flows:
43000 \$30,000 \$14,000 \$0 -\$12,000 -\$22,000 -\$31,000 -\$40,000 -\$40,000
Revenues 220,000 Less operating expenses: Commissions to amusement ho 60,000 Insurance 55,000 Depreciation 43,875 Maintenance 40,000 198,875 Net operating income 21,125 Total cost 390000 salvage value 39000 life 8 years NOI 21,125 add: non cash deduction for deprecia 43,875 Annual net cash flow 65,000 payback period 6 The simple rate of return would be Simple Rate of Return = Annual net operating income Initial investment Simple Rate of Return = 5.4%
Purchase cost of the equipment 682,000 110,000 Life of the equipment 10 years annual cost savings 110,000 less annual depreciation (270000/12 years 68200 Annual incremental net operating income 41,800 A piece of laborsaving equipment has just come onto the market that Mitsui Electronics, Ltd reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow: Annual cost savings that will be provided by the equipment
d., could use to

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