The following present value factors are provided for use in this problem. $\begin{array} { | l | l | l | }
\hline \text { Periods } & \text { Present value of } \mathbf { \$ 1 } \text { at } \mathbf { 8 \% } & \text { Present value of an annuity of } \mathbf { \$ 1 } \text { at } \mathbf { 8 \% } \
\hline 1 & 0.9259 & 0.9259 \
\hline 2 & 0.8573 & 1.7833 \
\hline 3 & 0.7938 & 2.5771 \
\hline 4 & 0.7350 & 3.3121 \
\hline
\end{array}$
Cliff Co. wants to purchase a machine for $40,000, but needs to earn an 8% return. The expected year-end net cash flows are $12,000 in each of the first three years, and $16,000 in the fourth year. What is the machine's net present value?
A) $52,000.
B) $2,685.
C) $(9,075).
D) $(28,240).
E) $42,685.

Question

The following present value factors are provided for use in this problem. $\begin{array} { | l | l | l | } 
\hline \text { Periods } & \text { Present value of } \mathbf { \$ 1 } \text { at } \mathbf { 8 \% } & \text { Present value of an annuity of } \mathbf { \$ 1 } \text { at } \mathbf { 8 \% } \
\hline 1 & 0.9259 & 0.9259 \
\hline 2 & 0.8573 & 1.7833 \
\hline 3 & 0.7938 & 2.5771 \
\hline 4 & 0.7350 & 3.3121 \
\hline
\end{array}$
Cliff Co. wants to purchase a machine for $40,000, but needs to earn an 8% return. The expected year-end net cash flows are $12,000 in each of the first three years, and $16,000 in the fourth year. What is the machine's net present value?
A) $52,000.
B) $2,685.
C) $(9,075).
D) $(28,240).
E) $42,685.

Quizplus · Accepted Answer

The net present value (NPV) is calculated by discounting each cash flow at 8% and subtracting the initial investment. The NPV is $2,685, calculated as follows:  NPV = ($12,000 * 0.9259) + ($12,000 * 0.8573) + ($12,000 * 0.7938) + ($16,000 * 0.7350) - $40,000 = $2,685.

The Following Present Value Factors Are Provided for Use in This