Saget Company is considering the purchase of equipment that would cost $35,000 and offer annual cash inflows of $10,500 over its useful life of 5 years.Assuming a required rate of return of 8%,what is the net present value of this investment opportunity? (PV of $1 and PVA of $1)(Use appropriate factor(s)from the tables provided.)

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Quizplus · Accepted Answer

The net present value (NPV) is calculated by discounting the future cash inflows and subtracting the initial investment. Using the present value annuity (PVA) factor for 5 years at 8% (3.9927) from the tables, the present value of the cash inflows is $10,500 * 3.9927 = $41,923. Subtracting the initial investment of $35,000 gives an NPV of $6,923.

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