Answer:
NPV = $5,926.226
Explanation:
The Net present value (NPV) is the difference between the Present value (PV) of cash inflows and the PV of cash outflows. A positive NPV implies a good and profitable investment project and a negative figure implies the opposite.
NPV = PV of cash inflows - PV of cash outflows
PV of annual savings= A× (1- (1+r)^(-n))/r
r- discount rate- 11%, n- number of years- 5, A- annual savings
= 10,000 × (1- 1.11)^(-5) )/0.11 = 36,958.97
PV of scrap value = F × (1+r)^(-n)
r- discount rate- 11%, n- number of years- 5, F- salvage value - 5,000
5,000× (1.11)^(-5)= 2,967.256
NPV = 36,958.97018 + 2,967.256 - 34,000
= 5,926.226
NPV = $5,926.226
