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 $93,000. The machine would reduce labor and other costs by $73,000 per year. The company requires a minimum pretax return of 16% on all investment projects. (Ignore income taxes.)

Required:

Provide your Excel input and the final net present value amount you calculated. (If a variable is not used in the calculation, input a zero (0). Omit the "$" and "%" signs in your response.) Round your answer to the nearest dollar and use a minus sign for negative numbers. Excel input: Rate %   Nper      PMT $      PV $      FV $    Net Present Value (NPV) $      Required: Input the required variables and the computed internal rate of return.  (If a variable is not used in the calculation, input a zero (0). Omit the "$" and "%" signs in your response.) Round your answer to one decimal place and use a minus sign for negative numbers. Excel input: Rate %   Nper      PMT $      PV $      FV $    Internal Rate of Return (IRR)      %

Answer 1

	Excel Input
	Rate	16
	Nper	9	(life)
	PMT	-73000	(Annual saving)
	PV	$336,277.70	=PV(16%,9,-73000,0,0)
	FV	0
	Net present value= present value of annual saving +present value of salvage-cash outflow
	Net present value	-19268	=336277.7+93000*((1/1.16)^9)-380000
	Another Method using NPV formula	-19268	=NPV(16%,73000,73000,73000,73000,73000,73000,73000,73000,166000)-380000
	Last year cashflow (annual saving+salvage)	166000.00	=73000+93000
	Excel Input
	Rate	0
	Nper	9
	PMT	-73000
	PV	0
	FV	0
	Year	Cashflow
	0	-380000
	1	73000
	2	73000
	3	73000
	4	73000
	5	73000
	6	73000
	7	73000
	8	73000
	9	166000.00
	IRR	14.6%	=IRR(Cell refrence of cell containing cashflow)