(2) Consider an asset that is 3 years old and has a remaining physical life of...

(2) Consider an asset that is 3 years old and has a remaining physical life of 2 years with the following projected cash flows:

EOY Revenue Operating Cost Salvage Value

4 $1,200 $800 $300

5 $1,100 $900 $0

Assume that the asset may currently be sold for $600 and that the before tax MARR is 10%. What is the PW of keeping the asset for TWO more years? Answer is -71.08 but I don't know how to get to it

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Expert Solution


	we have to compute the NPV of the keeping machine for 2 year

		i	ii	iii=i-ii	iv	v=iii*iv
	Year	Revenue	Cost	Net cash flow	PVIF @ 10%	Present value
	1	1200	800	400	0.9091	363.64
	2	1100	900	200	0.8265	165.29
A		Present value of cash flow =		528.92

B		Present value of cash outlow flow =		600

C	NPV =	PV of cash inflow - PV of cash outflow	(71.08)

		Answer =				(71.08)

ekkarill92 answered 1 year ago

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