Problem 4

What is the Net Present Value of an investment in more efficient equipment that will save the customer $20,000 per year for 10 years. However the customer has a 20% hurdle rate and the first cost of the new equipment is $100,000. What is the Net Present Value of the Investment and is purchasing the equipment justified?

Present Value of the Savings

[P/A, .20, 10] = _________________

Present Value of Savings = _________ x $_____________ = $__________________

Net Present Value is = $_____________ - $_____________ = $______________

Investment Justified? Yes/No____________________