Net Present Value

Use Exhibit $12$B$.1$ and Exhibit $12$B$.2$ to locate the present value of an annity of $$1,$ which is the amount to be multiplied times the future annual cash flow amount.

Each of the following scenarios is independent. Assume that all cash flows are after$-$tax cash flows,

a$.$ Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $$480,000$ per year, The system costs $$1,750,000$ and will last $10$ years. have a useful life of $6$ years. annual after$-$tax cash flows of $$135,000.$

Required:

Compute the NPV for Campbell Manufacturing, assuming a discount rate of $12\%.$ If required, round all present value calculations to the nearest dollar. Use the minus sign to indicate a negative NPV$.$

$

Should the company buy the new welding system? minus sign to indicate a negative NPV$.$

$4$

Should she invest? $

The sho be purchased. This reveals that the decision to accept or reject in this case is affected by differences in estimated

$3.$ What was the required investment for Barker Company's project? Round to the nearest dollar. If required, round all present value calculations to the nearest dollar.

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