Question

Management of Cullumber Mints, a confectioner, is considering purchasing a new jelly bean-making machine at a cost of $312,500. They project that the cash flows from this investment will be $134,000 for the next seven years. If the appropriate discount rate is 14 percent, what is the NPV for the project? (Enter negative amounts using negative sign, e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.)

NPV $____________

Cullumber Specialties just purchased inventory-management computer software at a cost of $1,652,950. Cost savings from the investment over the next six years will produce the following cash flow stream: $180,340, $260,240, $295,600, $593,250, $716,320, and $767,740. What is the payback period on this investment? (Round answer to 2 decimal places,e.g. 15.25.)

Payback period is

______________ years

Answer 1

Ans NPV = $ 262132.82

Year	Project Cash Flows (i)	DF@ 14%	DF@ 14% (ii)	PV of Project A ( (i) * (ii) )
0	-312500	1	1	(3,12,500.00)
1	134000	1/((1+14%)^1)	0.877	1,17,543.86
2	134000	1/((1+14%)^2)	0.769	1,03,108.65
3	134000	1/((1+14%)^3)	0.675	90,446.18
4	134000	1/((1+14%)^4)	0.592	79,338.76
5	134000	1/((1+14%)^5)	0.519	69,595.40
6	134000	1/((1+14%)^5)	0.456	61,048.60
7	134000	1/((1+14%)^5)	0.400	53,551.40
		NPV		2,62,132.85