Question
Basic NPV: No Salvage Value or Taxes
Carrie Rushing is considering the purchase of a new production machine that costs $120,000. She has been told to expect decreased annual operating expenses of $40,000 for four years. At the end of the fourth year, the machine will have no salvage value and will be scrapped.
Required:
What is the net present value of the machine if Carrie's cost of capital is 9 percent? Use the time value of money charts for your calculations. Round to the nearest dollar. (Ignore income taxes.)
Carrie Rushing is considering the purchase of a new production machine that costs $120,000. She has been told to expect decreased annual operating expenses of $40,000 for four years. At the end of the fourth year, the machine will have no salvage value and will be scrapped.
Required:
What is the net present value of the machine if Carrie's cost of capital is 9 percent? Use the time value of money charts for your calculations. Round to the nearest dollar. (Ignore income taxes.)