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KLM Flights are currrently in a financial crisis, and are looking at methods to decrease costs...

KLM Flights are currrently in a financial crisis, and are looking at methods to decrease costs to stay afloat. The company is considering the purchase of a new computerised system that is expected to save the company $64,000 at the end of each year in reduced wages.

The system costs $204,000, plus another $18,000 to be installed. It is expected to last for five years after which it can be sold for $42,000. Operating expenses (such as electricity and maintenance) are $6,000 pa.

a)Determine the annual net cash flows of this investment (ignore the effect of taxes). Enter the information in the following table. Indicate whether cash flows are + or -:

Time 0 1 2 3 4 5
Net Cash Flow

b)Calculate the NPV if the required rate of return is 12% pa.

NPV12% = $

c)Calculate the NPV if the required rate of return is 14% pa.

NPV14% = $

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please give thumbs up. It will help me.

jeff jeffy answered 1 year ago
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