Question

Quinn Industries is considering the purchase of a machine that would cost $380,000 and would last for 9 years. At the end of 9 years, the machine would have a salvage value of $95,500. The machine would reduce labor and other costs by $76,000 per year. The company requires a minimum pretax return of 14% on all investment projects. (Ignore income taxes.) Required: Provide your Excel input and the final net present value amount you calculated. Required: Input the required variables and the computed internal rate of return.

Rate

%

Nper

PMT

$

PV

$

FV

$

Answer 1

Particulars			Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7	Year 8	Year 9
Undiscounted Net Cash Flow			$ (380,000)	$ 76,000	$ 76,000	$ 76,000	$ 76,000	$ 76,000	$ 76,000	$ 76,000	$ 76,000	$ 171,500
				Discount Rate	14.0%
				Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7	Year 8	Year 9
Discounted Cash Flow			$ (380,000)	$ 66,667	$ 58,480	$ 51,298	$ 44,998	$ 39,472	$ 34,625	$ 30,372	$ 26,642	$ 52,738
Discount rate			14%
Total Present Value of future cash inflow			$ 405,291
Total Cash Outflow in Year 0			$ 380,000
Net Gain/ Loss			$ 25,291