The following present value factors are provided for use in

The following present value factors are provided for use in this problem. Present Value of $1 at 8% 0.9259 0.8573 0.7938 0.7350 Present Value of an Annuity of $1 at 8% 0.9259 1.7833 2.5771 3.3121 periods Xavier Co. wants to purchase a machine for $37.400 with a four year life and a $1100 salvage value. Xavier requires an t on investment. The expected year-end net cash flows are $12,400 in each of the four years. What is the machine\'s net p value?

Solution

Present value of inflows=$12400*Present value of annuity factor(8%,4)+$1100*Present value of discounting factor(8%,4)

=$12400*3.3121+$1100*0.7350

=$41878.54

NPV=Present value of inflows-Present value of outflows

=$41878.54-$37400

which is equal to

=$4479(approx).