Answered: (Ignore income taxes in this problem.)…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 10PB: Bouvier Restaurant is considering an investment in a grill that costs $140,000, and will produce...

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(Ignore income taxes in this problem.) Your Company uses a discount rate of 10%. The company has an opportunity to buy a machine now for $38,000 that will yield cash inflows of $10,000 per year for each of the next five years. The machine would have no salvage value. The net present value of this machine to the nearest whole dollar is: If the NPV is negative, enter your number with a – in front. Otherwise, just enter the number.

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Present value (PV), also known as present discounted value, is the value of a projected income stream as of the valuation date. The present value of money is generally less than the future value because money has interest-earning potential, or the time value of money, unless interest rates are zero or negative, in which case the present value is equal to or greater than the future value. A basic method to convey temporal value is "a dollar now is worth more than a dollar tomorrow."

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