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![Exercise 13-2 Net Present Value Method [LO13-2] The management of Kunkel Company is considering the purchase of a $31,000 machine that would reduce operating costs by $8,500 per year. Át the end of the machines five-year useful life, it will have zero scrap value. The companys required rate of retum is 13%. Click here to view Exhibit 13B-1 and Exhibit 138-2, to determine the appropriate discount factor(s) using table Required: 1. Determine the net present value of the investment in the machine. Net present value 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? (Any cash outflows should be indicated by a minus sign.) Total Cash Flows Item Cash Flow Years Annual cost savings Initial investment Net cash flow](https://media.cheggcdn.com/media%2F35e%2F35e33084-edcf-4d6e-b6da-24f5ae0c463d%2Fimage)
The management of Kunkel Company is considering the purchase of a $31,000 machine that would reduce operating costs by $8,500 per year. At the end of the machine’s five-year useful life, it will have zero scrap value. The company’s required rate of return is 13%. 1. Determine the net present value of the investment in the machine. 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? (Any cash outflows should be indicated by a minus sign.)
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