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Opry Company - net present value - 9 Jun, 2012

Net Present Value Method

 The management of Opry Company, a wholesale distributor of suntan products, is considering the purchase of a $25,000 machine that would reduce operating costs in its warehouse by $4,000 per year. At the end of the machine's 10-year useful life, it will have no scrap value. The company's required rate of return is 12%

 

REQUIRED:

(Ignore income taxes)

 

1. Determine the net present value of the investment in the machine.

2. What is the difference between the total, un-discounted cash inflows and cash outflows over the entire life of the machine?



Category : Management Accounting

Search Keywords :
Opry , Suntan , Distributor , Machine , Operating , Cost , Return , Net , Present , Value , NPV 


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Answer  - 9 Jun, 2012
1. Net present value = PV of cash inflows - initial investment The cash ....


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