question archive Concose Park Department is considering a new capital investment
Concose Park Department is considering a new capital investment
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Concose Park Department is considering a new capital investment. The following information is available on the investment. The cost of the machine will be $330,000. The annual cost savings if the new machine is acquired will be $85,000. The machine will have a 5-year life, at which time the terminal disposal value is expected to be $32,000. Concose Park Department is assuming no tax consequences. If Concose Park Department has a required rate of return of 11%, which of the following is closest to the present value of the project?
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Answer:
| Year | Cash Flow | Discount Factor @ 11% | Discounted Cash Flow |
| 0 | -3,30,000 | 1 | -330000 |
| 1 -5 | 85,000 | 3.6958 | 314143 |
| 5 | 32,000 | 0.5935 | 18992 |
| NPV | 3135 | ||
