Keltner Enterprises is considering investing in a new packing machine.The new machine will provide annual cash operating inflows of $12,300 for 5 years.The cost of the machine is $42,300 and it can be sold at the end of its 5-year useful life for $6,800.Keltner's required rate of return is 10%.What is the machine's net present value?
$$\begin{array}{lllr}
\text{Type of cash flow} & \text{n Periods} & \text{i Interest rate} & \text{ Factor } \
\hline \text{PV of \$ 1} & 5 & 10 \% & .62092 \
\text{FV of \$ 1} & 5 & 10 \% & 1.61051 \
\text{PV ordinary annuity} & 5 & 10 \% & 3.79079 \
\text{FV ordinary annuity} & 5 & 10 \% & 6.10510 \
\text{PV annuity due} & 5 & 10 \% & 4.16986
\end{array}$$

Question

Keltner Enterprises is considering investing in a new packing machine.The new machine will provide annual cash operating inflows of $12,300 for 5 years.The cost of the machine is $42,300 and it can be sold at the end of its 5-year useful life for $6,800.Keltner's required rate of return is 10%.What is the machine's net present value?
 $$\begin{array}{lllr} 
\text{Type of cash flow} & \text{n Periods} & \text{i Interest rate} & \text{ Factor } \
\hline \text{PV of  \$ 1}  & 5 & 10 \%  & .62092 \
\text{FV of  \$ 1}  & 5 & 10 \%  & 1.61051 \
\text{PV ordinary annuity} & 5 & 10 \%  & 3.79079 \
\text{FV ordinary annuity} & 5 &  10 \%  & 6.10510 \
\text{PV annuity due} & 5 &  10 \%  & 4.16986
\end{array}$$

Quizplus · Accepted Answer

The Answer of Keltner Enterprises is considering investing in a new packing machine.The new machine will provide annual cash operating inflows of $12,300 for 5 years.The cost of the machine is $42,300 and it can be sold at the end of its 5-year useful life for $6,800.Keltner's required rate of return is 10%.What is the machine's net present value?
 $$\begin{array}{lllr} 
\text{Type of cash flow} & \text{n Periods} & \text{i Interest rate} & \text{ Factor } \
\hline \text{PV of  \$ 1}  & 5 & 10 \%  & .62092 \
\text{FV of  \$ 1}  & 5 & 10 \%  & 1.61051 \
\text{PV ordinary annuity} & 5 & 10 \%  & 3.79079 \
\text{FV ordinary annuity} & 5 &  10 \%  & 6.10510 \
\text{PV annuity due} & 5 &  10 \%  & 4.16986
\end{array}$$

Keltner Enterprises Is Considering Investing in a New Packing Machine