Question

Second National Bank is considering adding 5 new ATM machines. Each machine costs $25,000 and installation costs are $15,000 per machine. Second National Bank expects the new machines to save $0.33 per transaction on 250,000 transactions per year on the new machines. It also expects the new machines to last for 15 years. If the bank needs to earn 14 percent return on this investment, what is the net present value of this investment?
a. $506,729
b. $306,729
c. $272,269
d. $381,729
e. $424,228

Can you provide a step-by-step process and the functions for a financial calculator

Answer 1

Answer:

The answer is "Option b".

Explanation:

When the typo-It should be the last for 15 years:

$NPV=-5\times (25000+15000)+0.33\times \frac{250000}{14\%} \times (1-\frac{1}{1.14^{15}})$

After solving the equation we get

$=306728.85878 \\\\=\ 306729$

When it was the last 25 years

$NPV=-5\times(25000+15000)+0.33\times \frac{250000}{14\%}\times(1-\frac{1}{1.14^{25}})=367016.51358$