Respond to your classmate in the following post and answer two questions.

1-What suggestions do you have for the problem they had an issue with? Can you explain it to them? 2- Perhaps you had issues with the same problem? What helped you?

My calculations resulted in an NPV of $8,654.72. However the answer choice that lined up with this value, did not capture the correct decision. If the NPV is positive, then the project should be executed. As you can see, the choice with the matching positive numerical value calls to decline the equipment purchase. The correct answer is $11,881.96 AND to purchase the equipment.

Can anyone help show me where my calculations went wrong in finding the correct NPV? Here is my thought process:

Starting with the givens:

Givens

• Purchase Cost $225,000.00
• Time 4
• Salvage Value $22,500.00
• Cash Flow during use $75,000.00
• Tax Rate 21%
• Rate of Return (ROR) 10%

Objective

• find NPV
• make decision on purchase

Step 1: set up timeline

Step 2: calculate BTCF

summation of income + recap depreciation/salvage value at end of life for years 1 to 4

Step 3: calculate straight line depreciation

Step 4: calculate taxable income and appropriate taxes to ultimately find ATCF

Taxable Income = BTCF - Depreciation Taxes = 0.21*Taxable Income ATCF = BTCF - Taxes

Step 5: calculate PV and NPV

=(1+)

=

I appreciate any insight and feedback you may have.