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    Determine the net present value of the machine purchase

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    A company is contemplating the purchase of a machine. The following estimates are available:

    Initial Outlay $35,000
    Annual reduction in mfg. labor cost $8,500
    Cost of capital 14%
    Estimated life of the machine 5 yrs
    Estimated residual value of machine $2,000

    Determine the net present value of the machine purchase

    © BrainMass Inc. brainmass.com June 3, 2020, 10:19 pm ad1c9bdddf
    https://brainmass.com/business/capital-budgeting/determine-net-present-value-machine-purchase-225749

    Solution Preview

    Determine the net present value with residual value
    A company is contemplating the purchase of a machine. The following estimates are available:

    Initial Outlay $35,000
    Annual reduction in mfg. labor cost $8,500
    Cost of capital 14% ...

    Solution Summary

    This solution is comprised of a detailed explanation to determine the net present value of the machine purchase.

    $2.19

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