Present value of $1
Present value of an annuity of $1
$\begin{array}{|c|l|l|l|l|l|l|}
\hline \text { Periods } & 4 \% & 6 \% & 8 \% & 10 \% & 12 \% & 14 \% \
\hline 1 & 0.962 & 0.943 & 0.926 & 0.909 & 0.893 & 0.877 \
\hline 2 & 0.925 & 0.890 & 0.857 & 0.826 & 0.797 & 0.769 \\hline 3 & 0.889 & 0.840 & 0.794 & 0.751 & 0.712 & 0.675 \
\hline 4 & 0.855 & 0.792 & 0.735 & 0.683 & 0.636 & 0.592 \
\hline 5 & 0.822 & 0.747 & 0.681 & 0.621 & 0.567 & 0.519 \
\hline 6 & 0.790 & 0.705 & 0.630 & 0.564 & 0.507 & 0.456 \\hline 7 & 0.760 & 0.665 & 0.583 & 0.513 & 0.452 & 0.400 \
\hline 8 & 0.731 & 0.627 & 0.540 & 0.467 & 0.404 & 0.351 \
\hline 9 & 0.703 & 0.592 & 0.500 & 0.424 & 0.361 & 0.308 \
\hline 10 & 0.676 & 0.558 & 0.463 & 0.386 & 0.322 & 0.270 \
\hline
\end{array}$ $\begin{array}{|c|l|l|l|l|l|l|}
\hline \text { Periods } & 4 \% & 6 \% & 8 \% & 10 \% & 12 \% & 14 \% \
\hline 1 & 0.962 & 0.943 & 0.926 & 0.909 & 0.893 & 0.877 \
\hline 2 & 1.886 & 1.833 & 1.783 & 1.736 & 1.690 & 1.647 \
\hline 3 & 2.775 & 2.673 & 2.577 & 2.487 & 2.402 & 2.322 \\hline 4 & 3.630 & 3.465 & 3.312 & 3.170 & 3.037 & 2.914 \
\hline 5 & 4.452 & 4.212 & 3.993 & 3.791 & 3.605 & 3.433 \
\hline 6 & 5.242 & 4.917 & 4.623 & 4.355 & 4.111 & 3.889 \
\hline 7 & 6.002 & 5.582 & 5.206 & 4.868 & 4.564 & 4.288 \\hline 8 & 6.733 & 6.210 & 5.747 & 5.335 & 4.968 & 4.639 \
\hline 9 & 7.435 & 6.802 & 6.247 & 5.759 & 5.328 & 4.946 \
\hline 10 & 8.111 & 7.360 & 6.710 & 6.145 & 5.650 & 5.216 \
\hline
\end{array}$
-Refer to the Figure.Gibb Clinical Practice is considering an investment in new imaging equipment that will cost $400,000.The equipment is expected to yield cash inflows of $80,000 per year for a six-year period.At the end of the sixth year,the firm expects to recover $150,000 from the sale of the equipment.Gibb set a required rate of return at 10%.What is the net present value of the investment? (Note: there may be a rounding error depending on the table you use to compute your answer.Choose the answer closest to the result you calculate.)

Question

Present value of $1
Present value of an annuity of $1
 $\begin{array}{|c|l|l|l|l|l|l|}
\hline \text { Periods } & 4 \% & 6 \% & 8 \% & 10 \% & 12 \% & 14 \% \
\hline 1 & 0.962 & 0.943 & 0.926 & 0.909 & 0.893 & 0.877 \
\hline 2 & 0.925 & 0.890 & 0.857 & 0.826 & 0.797 & 0.769 \\hline 3 & 0.889 & 0.840 & 0.794 & 0.751 & 0.712 & 0.675 \
\hline 4 & 0.855 & 0.792 & 0.735 & 0.683 & 0.636 & 0.592 \
\hline 5 & 0.822 & 0.747 & 0.681 & 0.621 & 0.567 & 0.519 \
\hline 6 & 0.790 & 0.705 & 0.630 & 0.564 & 0.507 & 0.456 \\hline 7 & 0.760 & 0.665 & 0.583 & 0.513 & 0.452 & 0.400 \
\hline 8 & 0.731 & 0.627 & 0.540 & 0.467 & 0.404 & 0.351 \
\hline 9 & 0.703 & 0.592 & 0.500 & 0.424 & 0.361 & 0.308 \
\hline 10 & 0.676 & 0.558 & 0.463 & 0.386 & 0.322 & 0.270 \
\hline
\end{array}$ $\begin{array}{|c|l|l|l|l|l|l|}
\hline \text { Periods } & 4 \% & 6 \% & 8 \% & 10 \% & 12 \% & 14 \% \
\hline 1 & 0.962 & 0.943 & 0.926 & 0.909 & 0.893 & 0.877 \
\hline 2 & 1.886 & 1.833 & 1.783 & 1.736 & 1.690 & 1.647 \
\hline 3 & 2.775 & 2.673 & 2.577 & 2.487 & 2.402 & 2.322 \\hline 4 & 3.630 & 3.465 & 3.312 & 3.170 & 3.037 & 2.914 \
\hline 5 & 4.452 & 4.212 & 3.993 & 3.791 & 3.605 & 3.433 \
\hline 6 & 5.242 & 4.917 & 4.623 & 4.355 & 4.111 & 3.889 \
\hline 7 & 6.002 & 5.582 & 5.206 & 4.868 & 4.564 & 4.288 \\hline 8 & 6.733 & 6.210 & 5.747 & 5.335 & 4.968 & 4.639 \
\hline 9 & 7.435 & 6.802 & 6.247 & 5.759 & 5.328 & 4.946 \
\hline 10 & 8.111 & 7.360 & 6.710 & 6.145 & 5.650 & 5.216 \
\hline
\end{array}$
-Refer to the Figure.Gibb Clinical Practice is considering an investment in new imaging equipment that will cost $400,000.The equipment is expected to yield cash inflows of $80,000 per year for a six-year period.At the end of the sixth year,the firm expects to recover $150,000 from the sale of the equipment.Gibb set a required rate of return at 10%.What is the net present value of the investment? (Note: there may be a rounding error depending on the table you use to compute your answer.Choose the answer closest to the result you calculate.)

Quizplus · Accepted Answer

The net present value (NPV) of the investment can be calculated by finding the present value of the cash inflows and the salvage value of the equipment, then subtracting the initial investment. Using the 10% column from the tables:- Present value of annuity of $80,000 for 6 years = $80,000 * 4.355 (from the annuity table) = $348,400- Present value of $150,000 received in 6 years = $150,000 * 0.564 (from the present value of $1 table) = $84,600- Total present value of cash inflows = $348,400 + $84,600 = $433,000- Initial investment = $400,000NPV = Total present value of cash inflows - Initial investment = $433,000 - $400,000 = $33,000

Present Value of $1 Present Value of an Annuity of $1

Present Value of $1
Present Value of an Annuity of $1