Westmont Publishing is considering the purchase of a used printing press costing $69,700. The printing press would generate a net cash inflow of $31,000 a year for 3 years. At the end of 3 years, the press would have no salvage value. The company's cost of capital is 10 percent. The company uses straight-line depreciation. The present value factors of an annuity of $1.00 for different rates of return are as follows:
The investment's net present value is:

Question

Westmont Publishing is considering the purchase of a used printing press costing $69,700. The printing press would generate a net cash inflow of $31,000 a year for 3 years. At the end of 3 years, the press would have no salvage value. The company's cost of capital is 10 percent. The company uses straight-line depreciation. The present value factors of an annuity of $1.00 for different rates of return are as follows:
 The investment's net present value is:

Quizplus · Accepted Answer

NPV = PV cash flows of $77,092.35 ($31,000 x 2.48685) less initial investment of $69,700 equals $7,392.35.

Westmont Publishing Is Considering the Purchase of a Used Printing