Present value of $1 Periods 4% 6% 8% 10% 12% 14% 1 0.96154 0.94340 0.92593 0.90909...

Present value of $1

*Periods*	4%	6%	8%	10%	12%	14%
1	0.96154	0.94340	0.92593	0.90909	0.89286	0.87719
2	0.92456	0.89000	0.85734	0.82645	0.79719	0.76947
3	0.88900	0.83962	0.79383	0.75131	0.71178	0.67497
4	0.85480	0.79209	0.73503	0.68301	0.63552	0.59208
5	0.82193	0.74726	0.68058	0.62092	0.56743	0.51937
6	0.79031	0.70496	0.63017	0.56447	0.50663	0.45559
7	0.75992	0.66506	0.58349	0.51316	0.45235	0.39964
8	0.73069	0.62741	0.54027	0.46651	0.40388	0.35056
9	0.70259	0.59190	0.50025	0.42410	0.36061	0.30751
10	0.67556	0.55839	0.46319	0.38554	0.32197	0.26974

Present value of an annuity of $1

Periods	4%	6%	8%	10%	12%	14%
1	0.96154	0.94340	0.92593	0.90909	0.89286	0.87719
2	1.88609	1.83339	1.78326	1.73554	1.69005	1.64666
3	2.77509	2.67301	2.57710	2.48685	2.40183	2.32163
4	3.62990	3.46511	3.31213	3.16987	3.03735	2.91371
5	4.45182	4.21236	3.99271	3.79079	3.60478	3.43308
6	5.24214	4.91732	4.62288	4.35526	4.11141	3.88867
7	6.00205	5.58238	5.20637	4.86842	4.56376	4.28830
8	6.73274	6.20979	5.74664	5.33493	4.96764	4.63886
9	7.43533	6.80169	6.24689	5.75902	5.32825	4.94637
10	8.11090	7.36009	6.71008	6.14457	5.65022	5.21612

Jackson Company invests in a new piece of equipment costing $40,000. The equipment is expected to yield the following amounts per year for the equipment's four-year useful life:

Cash revenues	$ 60,000
Cash expenses	(32,000)
Depreciation expenses (straight-line)	(10,000)
Income from equipment	$ 18,000

Cost of capital	14%

What is the net present value of this investment in equipment? (Note: Use the discount tables provided and round the NPV to the nearest dollar.)

a.$81,592

b.$(4,480)

c.$52,452

d.$41,584

Solutions

Expert Solution

Correct answer--------------d.$41,584

Working

Year	Cash revenues (A)	Cash expenses (B)	Net cash inflows (C=A-B)	Discounting factor (D)	Discounted cash flow (E=C x D)
1	$ 60,000	$ 32,000.00	$ 28,000.00	0.87719	$ 24,561
2	$ 60,000	$ 32,000.00	$ 28,000.00	0.76947	$ 21,545
3	$ 60,000	$ 32,000.00	$ 28,000.00	0.67497	$ 18,899
4	$ 60,000	$ 32,000.00	$ 28,000.00	0.59208	$ 16,578
Present value of all cash inflow					$ 81,584
Amount to be invested					$ 40,000
Net Present value					$ 41,584

ekkarill92 answered 1 year ago

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