The management of Kunkel Company is considering the purchase of a $43,000 machine that would reduce operating costs by $9,000 per year. At the end of the machine’s five-year useful life, it will have zero scrap value. The company’s required rate of return is 12%. Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using table. Required: 1. Determine the net present value of the investment in the machine. (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s).)

The management of Kunkel Company is considering the purchase of a $43,000 machine that would reduce operating costs by $9,000 per year. At the end of the machine’s five-year useful life, it will have zero scrap value. The company’s required rate of return is 12%.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using table.

 

Required:
1.	Determine the net present value of the investment in the machine. (A ny cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s).) 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? (Any cash outflows should be indicated by a minus sign.)

The management of Opry Company, a wholesale distributor of suntan products, is considering

The management of Opry Company, a wholesale distributor of suntan products, is considering the purchase of a $25,000 machine that would reduce operating costs in its warehouse by $4,000 per year. At the end of the machine’s 10-year useful life, it will have no scrap value. The company’s required rate of return is 12%. (Ignore income taxes.)

Click here to view Exhibit 13B-2, to determine the appropriate discount factor(s) using table.

    

Required:
1.	Determine the net present value of the investment in the machine. (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

  

Net present value

$ -2,399

    

2.	What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? (Omit the "$" sign in your response.)

  

Net cash flow

$ 15,000