Answer:
Net present value = -$22,531
Explanation:
As per the data given in the question,
Computation of NPV project
Particulars Period Pv factor at 14% Amount Present value
Cash inflows:
Annual saving in costs 1-7 4.288305 $112,000 $480,290
Salvage value 7 0.399637 $52,000 $20,781
Recovery of working capital 7 0.399637 $6,000 $2,398
Present value of cash inflows $503,469
Less: Cash outflows
Cost of Machine 0 1 $520,000 $520,000
Working capital 0 1 $6,000 $6,000
Net present value -$22,531
Working Note
The present value of cash inflows is
$480,290+ $20,781+$2,398 = $503,469
And, the net present value is
= $503,469- $520,000-$6,000
= -$22,531
