Question

Problem 2-13 Present values Lofting Snodbury is considering investing in a new boring machine. It costs $414,000 and is expected to produce the following cash flows: Year Cash flow (5000) 1 69 2 76 3 4 113 118 5 6 7 104 111 111 8 118 9 87 10 69 If the cost of capital is 13%, what is the machine's NPV? (Do not round Intermediate calculations. Enter your answer in whole dollars rounded to 2 decimal places.) Net present value

Answer 1

2-13)	Year	Cash Flow	PV Factor	PV of Cash Flow
	0	$         -4,14,000	1.00000	$                 -4,14,000.00
	1	$              69,000	0.88496	$                       61,061.95
	2	$              76,000	0.78315	$                       59,519.15
	3	$           1,13,000	0.69305	$                       78,314.67
	4	$           1,18,000	0.61332	$                       72,371.61
	5	$           1,04,000	0.54276	$                       56,447.03
	6	$           1,11,000	0.48032	$                       53,315.36
	7	$           1,11,000	0.42506	$                       47,181.73
	8	$           1,18,000	0.37616	$                       44,386.86
	9	$              87,000	0.33288	$                       28,960.98
	10	$              69,000	0.29459	$                       20,326.60
	NPV			$                   1,07,885.93
2-15)
a)	Year	Cash Flow	PV Factor 5%	PV of Cash Flow at 5%	PV Factor 10%	PV of Cash Flow at 10%	PV Factor 15%	PV of Cash Flow at 15%
	0	$         -7,20,000	1.00000	$                 -7,20,000.00	1.0000	$                    -7,20,000.00	1.0000	$                    -7,20,000.00
	1	$              31,000	0.95238	$                       29,523.81	0.9091	$                         28,181.82	0.8696	$                         26,956.52
	2	$           8,79,000	0.90703	$                   7,97,278.91	0.8264	$                     7,26,446.28	0.7561	$                     6,64,650.28
	NPV			$                   1,06,802.72		$                         34,628.10		$                       -28,393.19
	Net Present Value at 5%		$   1,06,802.72
	Net Present Value at 10%		$       34,628.10
	Net Present Value at 5%		$     -28,393.19
b)	Approximate IRR
	13%