Going Postal Service Inc.is considering an upgrade of its sorting machines.The cost of the project is $10,000 per machine and the improvement is expected to save $5,000 each year,beginning one year after the adoption of the project and continuing for a total of 5 years.If Going's cost of capital is 10%,is the project acceptable? Round answer to the nearest whole dollar.

Question

Quizplus · Accepted Answer

This project can be solved like an annuity, so:
NPV = PMT 11ea7fdb_fbe3_3cb7_a768_f72997acd0b0_TB2902_11 - Initial Investment
NPV = 5,000 11ea7fdb_fbe3_3cb8_a768_ebf7d85ddf36_TB2902_11 - 10,000 = $8,953.93
Using a financial calculator: CF0 = -10,000, C01 = 5,000, F01 = 5, NPV I = 10, CPT NPV = $8,953.93