Answered

Discover the answers to your questions at Westonci.ca, where experts share their knowledge and insights with you. Join our Q&A platform and get accurate answers to all your questions from professionals across multiple disciplines. Our platform provides a seamless experience for finding reliable answers from a network of experienced professionals.

Poe Company is considering the purchase of new equipment costing $81,500. The projected net cash flows are $36,500 for the first two years and $31,500 for years three and four. The revenue is to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Poe requires a 10% return on its investments. The present value of an annuity of 1 and present value of an annuity for different periods is presented below. Compute the net present value of the machine.

Sagot :

Answer:

$27,028.45

Explanation:

Net present value is the present value of after-tax cash flows from an investment less the amount invested.  

NPV can be calculated using a financial calculator  

Only projects with a positive NPV should be accepted. A project with a negative NPV should not be chosen because it isn't profitable.  

When choosing between positive NPV projects, choose the project with the highest NPV first because it is the most profitable.

Cash flow in year 0 = $-81,500

Cash flow in year 1 and 2 = $36,500

Cash flow in year 3 and 4 = $31,500

I - = 10%

NPV = $27,028.45

To find the NPV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.  

3. Press compute  

We appreciate your time. Please revisit us for more reliable answers to any questions you may have. We hope you found this helpful. Feel free to come back anytime for more accurate answers and updated information. Find reliable answers at Westonci.ca. Visit us again for the latest updates and expert advice.