Question

The Pantalone Company, Inc., is considering purchasing a new grinding machine. The initial outlay for the machine is $185,000. The required rate of return for Pantalone Company, Inc., is 11.5%. The expected cash flows are as follows: Year Expected After-tax Cash Flow 1 $20,000 2 $40,000 3 $70,000 4 $70,000 5 $60,000 6 $40,000 Calculate the Net Present Value of the investment Group of answer choices

Answer 1

Answer:

Net present value   $16,531.62

Explanation:

The computation of the net present value is shown below:

Year      Cash inflows    Discount rate   Present value

0            -185000                  1                    -185000

1               20000        0.896860987          17937.21973

2              40000         0.804359629         32174.38517

3              70000          0.721398771          50497.91394

4             70000           0.646994413         45289.60891

5             60000         0.580264048         34815.84286

6              40000          0.520416186        20816.64745

Net present value                                      $16,531.62