Question

Newport Corp, is considering the purchase of a new plece of equipment The cost savings from the equipment would result in an annual increase in cash flow of $207,000. The equipment will have an initisal cost of $951,000 and have a 6 year life. There is no salvage value for the equipment If the hurdle rate is 99%. what is the $1.) (Use appropriate factor from the PV tables. Round your final answer to the nearest dollar amount.) of net present value? Ignore income taxes. O Positive $22.419 O Negative O Zero O Positive $317000 $22,419
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Answer #1

Net present value = Present value of cash inflow-Present value of cash outflow

= (207000*4.4859)-951000

Net present value = -22419

So answer is b) Negative $22419

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