I just don't get NPV. This is a question i am struggling with. I say the answer is $41,592 but only because after randomly plugging in figures, i got the answer.
Jackson Company invests in a new piece of equipment costing $40,000. The equipment is expected to yield the following amounts per year for the equipment's four-year useful life:
Cash revenues $ 60,000
Cash expenses (32,000)
Depreciation expenses (straight-line) (10,000)
Income provided from equipment $ 18,000
Cost of capital 14%
What is the net present value of this investment in equipment, assuming no taxes are paid?
a. $81,592
b. $41,592
c. $(4,480)
d. $52,452
Jackson Company invests in a new piece of equipment costing $40,000. The equipment is expected to yield the following amounts per year for the equipment's four-year useful life:
Cash revenues $ 60,000
Cash expenses (32,000)
Depreciation expenses (straight-line) (10,000)
Income provided from equipment $ 18,000
Cost of capital 14%
What is the net present value of this investment in equipment, assuming no taxes are paid?
a. $81,592
b. $41,592
c. $(4,480)
d. $52,452