| the management of Kunkel Company is considering the purchase of a $26,000 machine that would reduce operating costs by $6,500 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 16%. |
| Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using table. |
| Required: | |
| 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.) |
