12%

Present value of net cash flows ###

Capital investment ###
Net present value ###

12%
Present value of net cash flows ###
Capital investment ###
Net present value $5,605

Assumed Net Annual Discount Factor Present Value

Year Cash Flows 12% 12%
1 1 2 (1)*(2)
2 $34,000 0.8929 ###
3 30,000 0.7972 ###
4 27,000 0.7118 ###
5 25,000 0.6355 ###
6 24,000 0.5674 ###
7 22,000 0.5066 ###
8 21,000 0.4524 ###
9 20,000 0.4039 ###
10 19,000 0.3606 ###
18,000 0.322 ###
$240,000 ###
24000
Present value at
Different Discount Rates
12% 15%
Discount factor for 10 periods 5.6502 5.019
Present value of net cash flows:
$24,000*5.65022 ###
$24,000*5.01877 ###
Capital investment ### ###
Positive (negative) net presnt value $5,605 ###
Initial Investment ###
Annual cash in Flows(revised) ###
Annual cash out Flows(revised) 15,000
Net annual cash flow ###

Estimated life of equipment 10 years

Discount rate 12% 0.32197
12%
Disco
### ### 107354.18 unt Present
### 3219.7 Cash flo * Factor Value
Present value of net annual cash flows ### * 5.65 $254,260
Initial Investment 200,000
Net present value $54,260

Project A Project B
Initial Investment $40,000 $90,000
Net annual cash inflow 10,000 19,000
Salvage value 5,000 10,000
Present value of net cash flows
($10,000*5.65022) + ($5,000*0.32197) $58,112
($19,000*5.65022) + (10,000*0.32197) $110,574