Problem #4: Budgets "UMPI Inc. is considering the purchase of a street paver machine for $225,000. The expected life of the machine will be three years, and it will have a salvage value of $25,000. Annual maintenance costs will total $7,500. Annual savings are predicted to be $92,500. The company's required rate of return is 8%. Ignoring the TVM, calculate the net cash inflow or outflow resulting from this investment opportunity. Be sure to prepare a schedule that clearly depicts the time frame of the cash flows. 1) Using the Present Value Factors for $1 at 8% noted above (table provided for reference), calculate the net present value of this investment (ignoring taxes) 2) Based on your answer in requirement 1: should UMPI purchase the street paver machine. Factors: Present Value of $1 (r=8%) Year 0 1.0000 Year 1 0.9259 Year 2 0.8573 Year 3 0.7938

Problem #4: Budgets "UMPI Inc. is considering the purchase of a street paver machine for $225,000. The expected life of the machine will be three years, and it will have a salvage value of $25,000. Annual maintenance costs will total $7,500. Annual savings are predicted to be $92,500. The company's required rate of return is 8%. Ignoring the TVM, calculate the net cash inflow or outflow resulting from this investment opportunity. Be sure to prepare a schedule that clearly depicts the time frame of the cash flows. 1) Using the Present Value Factors for $1 at 8% noted above (table provided for reference), calculate the net present value of this investment (ignoring taxes) 2) Based on your answer in requirement 1: should UMPI purchase the street paver machine. Factors: Present Value of $1 (r=8%) Year 0 1.0000 Year 1 0.9259 Year 2 0.8573 Year 3 0.7938

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 15E

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