You have the following information about a machine purchase:

Cost of Machine = £400,000

Corporation tax rate =19%

Life of project = 5 years

Discount rate = 10%

If the company can claim capital allowance using a straight-line basis, what is the net present value (NPV) of acquiring the machine, the nearest £1,000? Assume tax savings are received in the year they are generated and the machine has a zero scrap value.

A.£356,000
B.£318,000
C.£330,000
D. £400,000
E. £342,000

Answer rating: 100% (QA)

Statement showing NPV Particulars 0 1 2 3 4 5 NPV sum of PV Cost of machine 400000 ... View the full answer