Answer:
The project return is lower than the minimum accepted of 15% thus not profitable for the company
Net Present Value -1.279,86
Explanation:
Loan Present value
PMT of the loan:
[tex]PV \div \frac{1-(1+r)^{-time} }{rate} = C\\[/tex]
PV 65,000
time 4
rate 0.12
[tex]65000 \div \frac{1-(1+0.12)^{-4} }{0.12} = C\\[/tex]
C $ 21,400.238
Present value at MARR:
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C $21,400.24
time 4 years
rate 0.15
[tex]21400.2383598698 \times \frac{1-(1+0.15)^{-4} }{0.15} = PV\\[/tex]
PV $61,097.2175
Salvage value:
[tex]\frac{Salvage }{(1 + rate)^{time} } = PV[/tex]
Salvage $9,000
time 9 years
rate 0.15000
[tex]\frac{9000}{(1 + 0.15)^{9} } = PV[/tex]
PV 2,558.36
Cost savings present value:
Cost savings per year: 25,000
less maintenance expenses (13,000)
net cash flow 12,000
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C $ 12,000
time 9 years
rate 0.15
[tex]12000 \times \frac{1-(1+0.15)^{-9} }{0.15} = PV\\[/tex]
PV $57,259.0070
Net Present Value
PV cost savings + PV salvage - PV loan payment
57,259 + 2,558.36 - 61,097.22 = -1.279,86
