The Boyer Bank wants to add a new ATM machine in a busy mall.It knows the new machine will cost $60,000 and another $30,000 is required to install it in the mall.It expects to save $0.27 per transaction and generate 100,000 transactions per year.Also,it expects the new machine to last 8 years.If it needs to earn a 12% return,what is the NPV of this project? (Round your answer to the nearest $1,000)
A)$126,000
B)$44,000
C)$134,000
D)$27,000
E)$117,000

Question

Quizplus · Accepted Answer

The NPV is calculated by finding the present value of the savings from the transactions over 8 years and subtracting the initial investment. The savings per year is $27,000 (100,000 transactions * $0.27). The initial cost is $90,000 ($60,000 + $30,000). Using a discount rate of 12%, the NPV is approximately $44,000.

The Boyer Bank Wants to Add a New ATM Machine