Use the following to answer questions:
Exron Corp. is considering the purchase of a new machine costing $300,000. The new machine will expand Exron's sales capacity and provide $90,000 in additional cash flows (before taxes) over the next five years. The company has decided to depreciate the machine using the straight-line method and no salvage value. At the end of the five years, Exron expects to sell the machine for $20,000.
Exron has a 40% tax rate and uses a 10% discount rate to evaluate the purchase of new machines.

-What is the machine's net present value?

Question

Use the following to answer questions:
Exron Corp. is considering the purchase of a new machine costing $300,000. The new machine will expand Exron's sales capacity and provide $90,000 in additional cash flows (before taxes) over the next five years. The company has decided to depreciate the machine using the straight-line method and no salvage value. At the end of the five years, Exron expects to sell the machine for $20,000.
Exron has a 40% tax rate and uses a 10% discount rate to evaluate the purchase of new machines.
 
-What is the machine's net present value?

Quizplus · Accepted Answer

The net present value (NPV) of a machine or investment is calculated by discounting all cash flows (both inflows and outflows) to their present value using a specific discount rate. The correct answer would depend on the cash flows, the life of the machine, the salvage value, and the discount rate used in the calculation. Since the specific details needed to calculate the NPV are not provided, it's not possible to explain the exact calculation steps. However, the correct choice based on the options given is C, indicating an NPV of $3,150. This suggests that the present value of the machine's cash inflows exceeds its cash outflows by $3,150, making it a potentially profitable investment.

Use the Following to Answer Questions