Hawk Sporting Goods is a manufacturer of falconry equipment. Hawk is analyzing the purchase of a...

Hawk Sporting Goods is a manufacturer of falconry equipment. Hawk is analyzing the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $202,000. The equipment will have an initial cost of $850,000 and have a 6-year life. There is no salvage value for the equipment. If the hurdle rate is 9%, what is the approximate net present value? Ignore income taxes. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor from the PV tables. Round your final answer to the nearest dollar amount.)

Expert Solution

Computation of net present value
	i	ii	iii=i*ii
year	cash flow	PVIF @ 9%	present value
0	-850000	1.00000	(850,000)
1	202000	0.91743	185,321
2	202000	0.84168	170,019
3	202000	0.77218	155,981
4	202000	0.70843	143,102
5	202000	0.64993	131,286
6	202000	0.59627	120,446
NPV =			56,156

answer =		56,156

ekkarill92 answered 1 year ago

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