pay back, Net present value, and Internal rate of return methods.
Nucore company is thinking of purchasing a new candy wrapping nachine $370,000. The machine should save the company approximately $70,000 in operating per year over its estimated useful life of 10 years. the salvage value at the end of 10 expected to be $15,000 (ignore income tax effects)
You didn't state the estimated interest rate.
PV of purchase: 370000
PV of savings: ( 70K/yr , 10 years, XXX interest ratej)= I will do a sample, ten percent...
: 430K (appx, see http://www.capdm.com/demos/software/html/capdm/finance/netpresentvalue/usage.html
PV of salvage (10 percent):5783
PV of net transaction -370K+430K+5.8K=you do it.
Compute the present value of a $100 cash flow for the following combinations of discount rates and times:
a. r = 8 percent. t = 10 years.
b. r = 8 percent. t = 20 years.
c. r = 4 percent. t = 10 years.
d. r = 4 percent. t = 20 years
Compute the present value of a $100 cash flow for the following combinations of discount rates and times:
r = 8 percent, t = 10 years.
To calculate the present value of a cash flow, you can use the formula:
PV = CF / (1 + r)^t
where PV is the present value, CF is the cash flow, r is the discount rate, and t is the time period.
For the given combinations:
a. r = 8 percent, t = 10 years:
PV = 100 / (1 + 0.08)^10 = 46.65
b. r = 8 percent, t = 20 years:
PV = 100 / (1 + 0.08)^20 = 21.72
c. r = 4 percent, t = 10 years:
PV = 100 / (1 + 0.04)^10 = 67.56
d. r = 4 percent, t = 20 years:
PV = 100 / (1 + 0.04)^20 = 45.45
So, the present value of the $100 cash flow for the given combinations are:
a. $46.65
b. $21.72
c. $67.56
d. $45.45