Benz Company is considering the purchase of a machine that costs $100,000 and has a useful life of 18 years.The company's required discount rate is 12%.If the machine's net present value is $5,850,what must be the annual cash inflows associated with the machine,rounded to the nearest whole dollar? (Ignore income taxes in this problem.)

Question

Quizplus · Accepted Answer

To calculate annual cash inflows, we need to use the formula:

NPV = (Annual Cash inflow / Discount rate) - Initial investment

$5,850 = (Annual Cash inflow / 0.12) - $100,000

Annual Cash inflow = ($5,850 + $100,000) x 0.12
Annual Cash inflow = $14,600 (rounded to nearest whole dollar)

Therefore, the answer is B.

Benz Company Is Considering the Purchase of a Machine That