contestada

XYZ Corporation is considering the purchase of a machine that would cost $320,000, would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $75,000 per year. The company requires a minimum pretax return of 12% on all investment projects. The net present value of the proposed project is closest to:

Respuesta :

kashif9462675

Answer:

XYZ corporation has Net present value of -49641.78

Explanation:

In order to get the net present value for XYZ corporation it is important is draw the timeline for cash flows.

0 -$320000

1  $75000

2 $75000

3 $75000

4 $75000

5 $75000

then using PVIF table value at 12% we will get the discounted value of cash flows.

Year     Cash Flow        Discount factor

0          -$320000                1.000

1              $75000                 0.893

2             $75000                 0.797

3              $75000                 0.712

4              $75000                 0.636

5              $75000                 0.567

After getting the discount factor @ 12% from the PVIF table we will multiply the cash flow the with relevant discount factor to get discounted cash flows.

Year     Cash Flow        Discount factor   Discounted cash Flows

0          -$320000                1.000                    -$320000

1              $75000                 0.893                       $66964

2             $75000                 0.797                         $59790

3              $75000                 0.712                          $53384

4              $75000                 0.636                         $47664

5              $75000                 0.567                           $42557

at the end adding discounted cash flows will give us Net present value of $-49641

Otras preguntas