Question

i dont know what im doing wrong but its not the correct answer. help me please

g 10.000 Cay Hospital, paying any estimates that it can save $28.000 a year in cashewing costs for the next 10 yab a City Hospitalsed rate ofres 14% Arachows and former Cay Click the icon to view there o f ) e conto Click the icon to view the Present of actors) Click the icon to The s e n o u r the Present of o u t of factors) Read the requirements Requirement. Calculate the following for the a. Net present al INPR) (Round m o The nel present value is $ 146 purpose y ing machine tions and your final answers to the nearest whole orang presenta b. Payback period (Round your answer to two decimal places) The payback period is 4 years spal h e end of 10 years Assume depreciation de s are based on the 110.000 Requirement 2. How would your computations in Brement 1 beached the special purpose machine had a $10.000 cost and re a l value using the stre ethod Anbiety in the cons of c o ws NPV would Pa rk would increase decrease because the disposal value s an increase in the because the disposal value results in an additional present tow.

Answer 1

Answer is given below

your answer for NPV and Payback seems to be correct

but for requirement 2 according to me salvage value should not affect the payback period.

Below is the working of the answer. Let me know if you have any queries

Requirement 1 Cash Savings Less: Depreciation Income before tax Tax at 30% Income After Tax Add: Depreciation Cash inflow per annum $28,000 $11,000 $17,000 $5,100 $11,900 $11,000 $22,900 Present value factor 14% for 10 years 5.2161 a. Present value of cash inflow for 10 years Initial Investment Net Present Value $119,449 $110,000 $9,449 b. Payback Period Initial Investment Cash inflow per annum $110,000 $22,900 4.80 Requirement 2 NPV would increase because disposal value results in an increase in total present value of cash flow Note Payback would not be affected due to Salvage value because payback is recovered in 4.8 years and Salvage value is at the end of 10th year