The following present value factors are provided for use in this problem.
-Xavier Co.wants to purchase a machine for $37,000 with a four year life and a $1,000 salvage value.Xavier requires an 8% return on investment.The expected year-end net cash flows are $12,000 in each of the four years.What is the machine's net present value?
A)$3,480.
B)$2,745.
C)$40,480.
D)($3,480).
E)($2,745).

Question

The following present value factors are provided for use in this problem.  
-Xavier Co.wants to purchase a machine for $37,000 with a four year life and a $1,000 salvage value.Xavier requires an 8% return on investment.The expected year-end net cash flows are $12,000 in each of the four years.What is the machine's net present value?
A)$3,480. 
B)$2,745. 
C)$40,480. 
D)($3,480). 
E)($2,745).

Quizplus · Accepted Answer

The net present value (NPV) is calculated by discounting the expected cash flows back to their present value and subtracting the initial investment. Using the given 8% discount rate, the present value of the $12,000 annual cash flows for four years and the $1,000 salvage value can be calculated using a financial calculator or NPV formula. The NPV calculation results in a positive $3,480, indicating that the investment would return $3,480 more than the required 8% return.

The Following Present Value Factors Are Provided for Use in This