A machine is expected to reduce cash operating costs by $200,000 for each of the next...
A machine is expected to reduce cash operating costs by $200,000 for each of the next six years. Ignoring taxes, if the firm has a 14% required (expected) rate of return, the correct discounted net cash flow would be closest to:
a. $438,994.
b. $777,740.
c. $1,052,632.
d. $1,215,138.
Homework Answers
Correct answer----------b. $777,740.
Working
| Year | Cash inflow | PV annuity factor @14% for 6 years | Present value of all cash inflow |
| 1-6 | $ 200,000.00 | 3.88867 | $ 777,733.50 |
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