(Ignore income taxes in this problem.) The Whitton Company uses a discount rate of 16%. The company has an opportunity to buy a machine now for $18,000 that will yield cash inflows of $10,000 per year for each of the next three years. The machine would have no salvage value. The net present value of this machine to the nearest whole dollar is:

Question

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The net present value (NPV) is calculated by discounting the future cash inflows at the company's discount rate and subtracting the initial investment. The NPV is $4,460, calculated as follows: NPV = ($10,000 / 1.16) + ($10,000 / 1.16^2) + ($10,000 / 1.16^3) - $18,000.

(Ignore Income Taxes in This Problem