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cluponka [151]
3 years ago
3

The Pantalone Company, Inc., is considering purchasing a new grinding machine. The initial outlay for the machine is $185,000. T

he required rate of return for Pantalone Company, Inc., is 11.5%. The expected cash flows are as follows: Year Expected After-tax Cash Flow 1 $20,000 2 $40,000 3 $70,000 4 $70,000 5 $60,000 6 $40,000 Calculate the Net Present Value of the investment Group of answer choices
Business
1 answer:
Trava [24]3 years ago
4 0

Answer:

Net present value   $16,531.62

Explanation:

The computation of the net present value is shown below:

<u>Year      Cash inflows    Discount rate   Present value </u>

0            -185000                  1                    -185000

1               20000        0.896860987          17937.21973

2              40000         0.804359629         32174.38517

3              70000          0.721398771          50497.91394

4             70000           0.646994413         45289.60891

5             60000         0.580264048         34815.84286

6              40000          0.520416186        20816.64745

Net present value                                      $16,531.62

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Answer:

If Ricardian neutrality holds true, after this change in the government's budget, private savings will equal 40.

Explanation:

S - I = X - M, where

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or,

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Initially,

65 - 30 = 90 - 100 = - 10

When budget deficit falls to 50,

Sp - 90 = 50 - 100

Sp = - 50 + 90 = 40

Therefore, If Ricardian neutrality holds true, after this change in the government's budget, private savings will equal 40.

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