The following present value factors are provided for use in this problem. Periods Present Value of $1 at 8% Present Value of an Annuity of $1 at 8% 1 0.9259 0.9259 2 0.8573 1.7833 3 0.7938 2.5771 4 0.7350 3.3121 Xavier Co. wants to purchase a machine for $37,000 with a four year life and a $1,000 salvage value. Xavier requires an 8% return on investment. The expected year-end net cash flows are $12,000 in each of the four years. What is the machine's net present value

The multiple choices are:

$3,480.

$2,745.

$40,480.

($3,480).

($2,745).

The correct option is $3480

Explanation:

The net present of the value is the present value of the cash inflows minus the initial cash outflow.

The initial cash outflow is $37,000

cash inflows from year 1 to 3 is $12,000

cash inflows in year 4 is $13,000 (actual cash inflow+salvage value of $1000)

present of value of the first three years' cash flow=$12,000*present value of annuity for the first three years(2.5771)

present value of cash inflow for the first three years=$12,000*2.5771=$ 30,925.20  

present value of year 4 cash inflow=$13,000*0.7350=$9,555

Total present value of cash inflows=$30,925.20+$9,555=$ 40,480.20  

NPV = $40,480.20-$37,000=$3480.20

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

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