Asked by
Makayla Blount
on Oct 23, 2024
Verified
A machine costs $25 000. It is expected to generate annual revenue of $8000 and annual expenses of $2000 each year for five years. The required rate of return is 12 per cent. What is the net present value of the machine?
A) $21 630
B) $28 840
C) ($3370)
D) $3840
Net Present Value
A financial metric used to evaluate the profitability of an investment, calculated by subtracting the present value of cash outflows from the present value of cash inflows over a period.
Annual Revenue
The total amount of money earned from the sale of goods or services in a fiscal year before any expenses are subtracted.
Annual Expenses
The total amount of money spent or costs incurred by a business or individual in a one-year period.
- Understand the concept and application of net present value in evaluating investments.
Verified Answer
PH
Learning Objectives
- Understand the concept and application of net present value in evaluating investments.