Blender Inc. purchased a new piece of equipment that cost $120,000. The equipment is will be used for 10 years and will have a salvage value of $10,000. The annual operating cash inflows will be $45,000, and the annual operating cash outflows will be $30,000. The tax rate is 21%, and the company requires an after-tax rate of return of 8%. Calculate the net present value (NPV) of the equipment

Question

Quizplus · Accepted Answer

(($45,000 - $30,000) x 6.71008 x (1 - .21)) + ((($120,000 - $10,000) ÷ 10) x 6.71008 x .21) + ($10,000 x .46319) - $120,000 = -$20,353
((Cash in. - Cash out) x PVAF, n 10, i=8% x (1-tax rate)) + (((cost - sal. val.) ÷ years) x PVAF, n 10, i=8% x tax rate) + (sal. val x PVIF, n10, i = 8%) - cost