Oakland Shop is considering the purchase of a used printing press costing $9,600.The printing press would generate an annual cash flow of $4,000 per year for three years.At the end of three years, the press would have no salvage value.The company's cost of capital is 10 percent.The company uses straight-line depreciation with no mid-year convention. What is the net present value for the press, assuming no taxes are paid?

Question

Quizplus · Accepted Answer

The NPV is calculated by discounting the cash flows at the cost of capital (10%). The NPV is $348, calculated as follows: NPV = ($4,000 / (1+0.10)^1) + ($4,000 / (1+0.10)^2) + ($4,000 / (1+0.10)^3) - $9,600.

Oakland Shop Is Considering the Purchase of a Used Printing