Rogers Corporation Rogers Corporation is considering an investment in a labor-saving machine. Information on this machine follows:
Refer to Rogers Corporation. Assume for this question only that Rogers Corporation uses a discount rate of 16 percent to evaluate projects of this type. What is the project's net present value? Present value tables or a financial calculator are required.

Question

Rogers Corporation Rogers Corporation is considering an investment in a labor-saving machine. Information on this machine follows:
 Refer to Rogers Corporation. Assume for this question only that Rogers Corporation uses a discount rate of 16 percent to evaluate projects of this type. What is the project's net present value? Present value tables or a financial calculator are required.

Quizplus · Accepted Answer

Using a financial calculator or present value tables, the net present value of the labor-saving machine investment is calculated as follows:

CF0 = -$40,000 (initial investment)
CF1 = $11,000 (cash flow in year 1)
CF2 = $20,000 (cash flow in year 2)
CF3 = $25,000 (cash flow in year 3)
I = 16%

Using the NPV function on a financial calculator or present value tables, we find that the project's net present value is -$3,806. Therefore, the best choice is B as it has the closest value to the calculated net present value.

Rogers Corporation Rogers Corporation Is Considering an Investment in a Labor-Saving