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$163 a What would be the net present value of a microwave oven that costs $163 and will save you $72 a year in time and food away from home? Assume an average return on your savings of 5 percent for 6 years. (Hint: Calculate the present value of the annual savings, then subtract the cost of the microwave.) Use Exhibit 1-D. (Round PVA factor to 3 decimal places and final answer to 2 decimal places.) anual saw ot S dee Eshibi D f Net present value

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Answer #1

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=$72[1-(1.05)^-6]/0.05

=$72*5.076

=$365.47

NPV=Present value of inflows-Present value of outflows

=$365.47-$163

=$202.47(Approx).

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