The management of Niagra National Bank is considering an investment in automatic teller machines. The machines would cost $124,200 and have a useful life of seven years. The bank’s controller has estimated that the automatic teller machines will save the bank $27,000 after taxes during each year of their life (including the depreciation tax shield). The machines will have no salvage value. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Compute the net present value of the proposed investment assuming an after-tax hurdle rate of: (a) 10 percent, (b) 12 percent, and (c) 14 percent. (Negative amounts should be indicated by a minus sign.)
The management of Niagra National Bank is considering an investment in automatic teller machines. The machines would cost $124,200 and have a useful life of seven years. The bank’s controller has estimated that the automatic teller machines will save the bank $27,000 after taxes during each year of their life (including the depreciation tax shield). The machines will have no salvage value. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Compute the net present value of the proposed investment assuming an after-tax hurdle rate of: (a) 10 percent, (b) 12 percent, and (c) 14 percent. (Negative amounts should be indicated by a minus sign.)
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter15: Capital Investment Analysis
Section: Chapter Questions
Problem 15.2.1MBA
Related questions
Question
The management of Niagra National Bank is considering an investment in automatic teller machines. The machines would cost $124,200 and have a useful life of seven years. The bank’s controller has estimated that the automatic teller machines will save the bank $27,000 after taxes during each year of their life (including the
Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.)
-
Compute the
net present value of the proposed investment assuming an after-tax hurdle rate of: (a) 10 percent, (b) 12 percent, and (c) 14 percent. (Negative amounts should be indicated by a minus sign.)
Transcribed Image Text:Future and Present
Value
Value Tables
Table I
Future Value of $1.00(1 + "
Period
4%
6%
8%
10%
12%
14%
20%
1
1.040
1.060
1.080
1.100
1.120
1.140
1.200
1.082
1.124
1.166
1.210
1.254
1.300
1.440
3
1.125
1.191
1.260
1.331
1.405
1.482
1.728
4
1.170
1.263
1.361
1.464
1.574
1.689
2.074
5
1.217
1.338
1.469
1.611
1.762
1.925
2.488
6.
1.265
1.419
1.587
1.772
1.974
2195
2.986
7
1.316
1.504
1.714
1.949
2.211
2.502
3.583
8.
1.369
1.594
1.851
2.144
2.476
2.853
4.300
9.
1.423
1.690
1.999
2.359
2.773
3.252
5.160
10
1.480
1.791
2.159
2.594
3.106
3.707
6.192
11
1.540
1.898
2.332
2.853
3.479
4.226
7.430
12
1.601
2.012
2.518
3.139
3.896
4.818
8.916
13
1.665
2.133
2.720
3.452
4.364
5.492
10.699
14
1.732
2.261
2.937
3.798
4.887
6.261
12.839
15
1.801
2.397
3.172
4.177
5.474
7.138
15.407
20
2.191
3.207
4.661
6.728
9.646
13.743
38.338
30
3.243
5.744
10.063
17.450
29.960
50.950
237.380
40
4.801
10.286
21.725
45.260
93.051
188.880
1,469.800
Table II
Future Value of a Serles of
$1.00 Cash Flows
(Ordinary Annulty)
(1 + n° – 1
Period
4%
6%
8%
10%
12%
14%
20%
1
1.000
1.000
1.000
1.000
1.000
1.000
1.000
2
2.040
2.060
2.080
2.100
2.120
2.140
2.220
3
3.122
3.184
3.246
3.310
3.374
3.440
3.640
4
4.247
4.375
4.506
4.641
4.779
4.921
5.368
5.416
5.637
5.867
6.105
6.353
6.610
7.442
6.633
6.975
7.336
7.716
8.115
8.536
9.930
7
7.898
8.394
8.923
9.487
10.089
10.730
12.916
8
9.214
9.898
10.637
11.436
12.300
13.233
16.499
9.
10.583
11.491
12.488
13.580
14.776
16.085
20.799
10
12.006
13.181
14.487
15.938
17.549
19.337
25.959
11
13.486
14.972
16.646
18.531
20.655
23.045
32.150
12
15.026
16.870
18.977
21.385
24.133
27.271
39.580
13
16.627
18.882
21.495
24.523
28.029
32.089
48.497
14
18.292
21.015
24.215
27.976
32.393
37.581
59.196
15
20.024
23.276
27.152
31.773
37.280
43.842
72.035
20
29.778
36.778
45.762
57.276
75.052
91.025
186.690
30
56.085
79.058
113.283
164.496
241.330
356.790
1,181.900
40
95.026
154.762
259.057
442,597
767.090
1,342.000
7,343.900
Transcribed Image Text:Period
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
24%
26%
28%
30%
32%
1
.962
943
926
.909
893
.877
.862
.847
.833
.820
.806
.794
.781
.769
.758
925
890
857
.826
.797
.769
.743
.718
.694
.672
.650
.630
.610
.592
.574
.889
840
.794
.751
.712
.675
.641
.609
.579
.551
.524
.500
.477
455
435
4
855
.792
.735
.683
.636
.592
.552
.516
482
.451
423
397
.373
350
329
822
.747
.681
.621
.567
.519
.476
.437
402
.370
341
315
.291
269
250
6
.790
.705
.630
.564
.507
456
.410
.370
.335
.303
.275
250
227
207
.189
7
.760
.665
583
.513
452
400
.354
.314
279
.249
.222
.198
.178
.159
.143
8
.731
627
.540
467
404
.351
.305
.266
233
.204
.179
.157
.139
.123
.108
.703
.592
.500
424
361
308
263
.225
.194
.167
.144
.125
.108
.094
.082
10
.676
558
463
386
322
270
227
.191
.162
.137
.116
.099
.085
.073
.062
11
.650
527
429
.350
287
237
.195
.162
.135
.112
.094
.079
.066
.056
.047
12
.625
497
397
.319
.257
208
.168
.137
.112
.092
.076
.062
.052
.043
.036
13
.601
469
368
290
229
.182
.145
.116
.093
.075
.061
.050
.040
.033
.027
14
.577
442
340
263
205
.160
.125
.099
078
.062
.049
.039
.032
.025
.021
15
555
417
315
239
.183
.140
.108
.084
.065
.051
.040
.031
.025
020
.016
20
456
312
215
.149
.104
.073
051
.037
.026
019
.014
010
.007
.005
.004
30
308
.174
.099
.067
.033
.020
.012
.007
.004
.003
.002
.001
.001
40
208
.097
046
.022
011
.005
003
.001
.001
Table IV
Present Value of Serles of
$1.00 Cash Flows
1
Perlod
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
24%
25%
26%
28%
30%
0.962
0.943
0.926
0.909 0.893 0.877 0.862 0.847 0.833
0.820
0.806
0.800
0.794
0.781
0.769
1.886
1.833
1.783
1.736
1.690
1.647
1.605
1.566
1.528
1.492
1.457
1.440
1.424
1.392
1.361
2.775
2.673
2.577
2.487
2.402
2.322
2.246
2.174
2.106
2.042
1.981
1.952
1.923
1.868
1.816
4
3.630
3.465
3.312
3.170
3.037
2.914
2.798
2.690
2.589
2.494
2.404
2.362
2.320
2.241
2.166
4.452
4.212
3.993
3.791
3.605
3.433
3.274
3.127
2.991
2.864
2.745
2.689
2.635
2.532
2.436
6
5.242
4.917
4.623
4.355
4.111
3.889
3.685
3.498
3.326
3.167
3.020
2.961
2.885
2.759
2.643
7
6.002
5.582
5.206
4.868
4.564
4.288
4.039
3.812
3.605
3.416
3.242
3.161
3.083
2.937
2.802
6.733
6.210
5.747
5.335
4.968
4.639
4.344
4.078
3.837
3.619
3.421
3.329
3.241
3.076
2.925
6.
7.435
6.802
6.247
5.759
5.328
4.946
4.607
4.303
4.031
3.786
3.566
3.463
3.366
3.184
3.019
10
8.111
7.360
6.710
6.145
5.650
5.216
4.833
4.494
4.192
3.923
3.682
3.571
3.465
3.209
3.092
11
8.760
7.887
7.139
6.495
5.938
5.453
5.029
4.656
4.327
4.035
3.776
3.656
3.544
3.335
3.147
12
9.385
8.384
7.536
6.814
6.194
5.660
5.197
4.793
4.439
4.127
3.851
3.725
3.606
3.387
3.190
13
9.986
8.853
7.904
7.103
6.424
5.842
5.342
4.910
4.533
4.203
3.912
3.780
3.656
3.427
3.223
14
10.563
9.295
8.244
7.367
6.628
6.002
5.468
5.008
4.611
4.265
3.962
3.824
3.695
3.459
3.249
15
11.118
9.712
8.559
7.606
6.811
6.142
5.575
5.092
4.675
4.315
4.001
3.859
3.726
3.483
3.268
20
13.590
11.470
9.818
8.514
7.469
6.623
5.929
5.353
4.870
4.460
4.110
3.954
3.808
3.546
3.316
30
17.292
13.765
11.258
9.427
8.055
7.003
6.177
5.517
4.979
4.534
4.160
3.995
3.842
3.569
3.332
40
19.793
15.046
11.925
9.779
8.244
7.105
6.234
5.548
4.997
4.544
4.166
3.999
3.846
3.571
3.333
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning