Answered: p=.30 p=.30 First cost $40,000…

Business

Finance

p=.30 p=.30 First cost $40,000 $40,000 $40,000 Annual savings 2,000 5,000 8,000 Annual costs 12,000 8,000 6,0

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 3PROB

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Question

ABC Inc. must purchase a welding machine. The following is known about the machine and about possible cash flows.

	p=.40	p=.30	p=.30
First cost	$40,000	$40,000	$40,000
Annual savings	2,000	5,000	8,000
Annual costs	12,000	8,000	6,000
Actual salvage value	4,000	5,000	6,500

The machine is expected to have a useful life of 8 years. The company has a MARR of 7%. Determine the NPW of the machine.

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