Ivanhoe Corporation is considering buying a brand new machine and has gathered the following data: Investment Estimated life Estimated annual cash inflows $104,800 5 years $29,900 Estimated annual cash outflows $10,000 Salvage value for the machine is estimated to be zero. Click here to view the factor table. Calculate the net present value of the machine assuming a 8% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124. Round present value answer to O decimal places, e.g. 125.) Net Present Value $ Should the company buy the machine based on your results?

Ivanhoe Corporation is considering buying a brand new machine and has gathered the following data: Investment Estimated life Estimated annual cash inflows $104,800 5 years $29,900 Estimated annual cash outflows $10,000 Salvage value for the machine is estimated to be zero. Click here to view the factor table. Calculate the net present value of the machine assuming a 8% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124. Round present value answer to O decimal places, e.g. 125.) Net Present Value $ Should the company buy the machine based on your results?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...

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Southwest Transportation Inc. is considering a distribution facility at a cost of $64,000. The facility has an estimated life of 10 years and a no residual value. It is expected to provide yearly net cash flows of $32,000. The company's minimum desired rate of return for net present value analysis is 12%. Click here to access the present value tables (Exhibit 2 and Exhibit 5) to use for this problem. a. Compute average rate of return, giving effect to straight-line depreciation on the investment. Round to one decimal place.
I want you to show and explain the explanation below. The answer is correct but i can't understand how it come up with the right answer. Attached pic below is the problem The annual estimated cash flow is $140,000. The salvage value will be 12% of the initial price after 5 years. The discount rate (r) is 18% Let us assume the initial price of the doughnut machine be X. PV of cash inflows=PV of cash outflows$140,000×PVAF4,18%+.12X×PVF5,18%=X$140,000×2.69006180465+.12X×0.43710921621=X$376,608.652651=X-0.05245310594$376,608.652651=0.94754689406XX=$397,456.479475 The maximum purchase price of the doughnut machine is $397,456.48.
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