Answer: $2,950
Explanation:
The Net Present Value results from when you subtract the present value of all costs from the present value of benefits.
The Initial cost of the equipment is,
= 60,000+ 3,000 (installation )
= $63,000
= 5/8
= 0.625
= 7.625% discount rate
Year 1
Present Value = 17,000/(1+ 7.625%)
= $11,149.83
Year 2
Present Value = 17,000/(1 + 7.625%)^2
= $14,676.50
Year 3
Present Value = 24,000/(1+7.625%)^3
= $19,251.82
Year 4
Present Value = 28,000 / (1+7.625%)^4
= $20,869.18
Net Present Value = $11,149.83 + $14,676.50 + $19,251.82 + $20,869.18 - $63,000
= $2,950.33
= $2,950
The Maintenance costs were already included in the Cash Flow projections for the 4 years.
Net Present Value is therefore $2,950
