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The management of Kunkel Company is considering the purchase of a $36,000 machine that would...

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Accounting

The management of Kunkel Company is considering the purchase of a $36,000 machine that would reduce operating costs by $8,500 per year. At the end of the machines five-year useful life, it will have zero scrap value. The companys required rate of return is 13%.

Use Excel or a financial calculator to solve.
Required:
1a.

Determine the net present value of the investment in the machine. (Any cash outflows should be indicated by a minus sign. Round answers to the nearest dollar.)

Net present value $(6,106)

2b.

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.)

Item Cash Flow Years Total Cash Flows
Annual cost savings $1 5 $5
Initial investment $1 1 1
Net cash flow $4

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