The management of Opry Company, a wholesale distributor of suntan products, is considering the purchase of a $25,000 machine that would reduce operating costs in its warehouse by $4,000 per year. At the end of the machine's 10-year useful life, it will have no scrap value. The company's required rate of return is 12%
(Ignore income taxes)
1.Determine the net present value of the investment in the machine.
PV of purchase value of machine=-$25000 (negative sign indicates cash ...
Solution calculates NPV of the given investment. It also calculates the difference between the total, un-discounted cash inflows and cash outflows over the entire life of the machine.