Exercise 13-1 Net Present Value Method [LO1]

The management of Opry Company, a wholesale distributor of suntan products, is considering the purchase of a $32,000 machine that would reduce operating costs in its warehouse by $6,500 per year. At the end of the machine?s 7-year useful life, it will have no scrap value. The company?s required rate of return is 12%. (Ignore income taxes.)

Click here to viewExhibit 13B-2,to determine the appropriate discount factor(s) using table.

Required:1.Determine the net present value of the investment in the machine.(Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

Net present value$

2.What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine?(Omit the "$" sign in your response.)

Net cash flow$

Exercise 13-1 Net Present iiiielue Method [L01] The management of Opry Company, a wholesale distributor of suntan products, is considering the purchase of a $32,000 machine that would reduce operating costs in its warehouse by $6.50.} per year. At the end of the machine's ?-year useful lifeI it will have no scrap value. The company's required rate of return is 12%. {Ignore income taxes.) Click here to view Exhibit 135-2, to determine the appropriate discount factorlfs) using table. Required: 1. Determine the net present value of the investment in the machine. [Negative amount should be indicated by a minus sign. Round discount factorts} to 3 decimal placesI intermediate and final answers to the nearest dollar amount. Omit the "5" sign in your response} Net present 'if'lLB $ |:| 2. What is the difference between the total. undisoounted cash inflows and cash outows over the entire life of the machine? [Omit the "5" sign in your response} Net cash ow 5:]