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?

Question 1:

In this question, we will look about the explanation of how to find Net Present Value and based on that which equipment should be purchased.

To calculate the Net Present Value (NPV) of the equipment purchase, we will use the following formula:

Given the information:

Cost of equipment= $22000

Book value = $22000* 10%= $2200

Depreciation = (Cost Salvage)/ Life = (22000-2200)/4 = 4950

OCF = 8000*(1-0.28) + 4950

Now, calculate the cash flow for each year:

PVF = OCF PVIFA@10%, 4years + Salvage value PVIFA@10%,4years Cost of equipment

PVF = 7146 (1/r)*(1-(1/(1+r)^n)) + 2200* (1/(1+r)^n)- 22000

PVF = 7146 (1.10)*(1-(1/(1+0.10)^4)) + 2200*(1/(1+0.10)^4 22000

NPV = $2154.49

The NPV is $2,154.49, which is positive. Therefore, the equipment should be purchased.

So, the correct answer is: The NPV is $2,154.49, and yes, the equipment should be purchased.

Question 2:

In this question, We will calculate Taxable income using revenues, depreciation and cash expenses

Using the formula to calculate Taxable income,

Taxable income = Revenues + Depreciation capture cash expenses Depreciation

Taxable income= 750000 + 75000 625000 140000

Taxable income = $60,000

Taxable income for the firm is $60,000.

From the above 2 problems I answered those two correctly. But in Question 1 I found difficulty in calculating and arriving sums after formula application. It quite challenging to do the problem with difficult calculations part. I thought that I cleared the sums with explanation clearly and this will helpful to you all to solve your doubts regarding this sums.