Natick Products Is Evaluating an Investment in New Production Machinery

Multiple Choice

Natick Products is evaluating an investment in new production machinery. The initial investment is $700,000 and will yield cash flows of $120,000 per year for an 8 year period. At the end of 8 years, the machinery will be sold and has expected residual value of $90,000. Natick uses a discount rate of 6%. What is the net present value of the investment?
$\begin{array}{|c|c|c|c|c|c|c|}\hline \text {Present Value of}\\ \text {an Annuity of }\\\$1\\\hline&5\%&6\%&7\%&8\%&9\%&10\%\\\hline1 & 0.952& 0.943 & 0.935 & 0.926 & 0.917 & 0.909 \\\hline 2& 1.859 & 1.833 & 1.808 & 1.783 & 1.759 & 1.736 \\\hline 3& 2.723 & 2.673 & 2.624 & 2.577 & 2.531 & 2 .487 \\\hline 4& 3.546 & 3.465 & 3.387 & 3.311 & 3.240 &3.170 \\\hline 5& 4.329 & 4.212 & 4.100 & 3.993 & 3.890 & 3 .791 \\\hline 6& 5.07 d & 4.917 & 4.767 & 4.623 & 4.480 &4.355 \\\hline 7 & 5.786 & 5.582 & 5.389 & 5.206 & 5.033 &4.868 \\\hline 8 & 6.463 & 6.210 & 5.971 & 5.747 & 5.535 & 5 .759 \\\hline 9 & 7.108 & 6.802 & 6.515 & 6.247 & 5.995 & 5.759 \\\hline 10& 7.722 & 7.360 &7.024 & 6.710 & 6.418 & 6.145\\\hline\end{array}$
$\begin{array}{|c|c|c|c|c|c|c|}\hline \text {Present Value of}\\ \text {an Annuity of }\\\$1\\\hline&5\%&6\%&7\%&8\%&9\%&10\%\\\hline1 & 0.952& 0.943 & 0.935 & 0.926 & 0.917 & 0.909 \\\hline 2& 0.907 & 0.890 & 0.873 & 0.857 & 0.847 & 0.826 \\\hline 3& 0.864 & 0.840 & 0.816 & 0.794 & 0.771 & 0.751 \\\hline 4& 0.823 & 0.792 & 0.763 & 0.735 & 0.708 &0.683 \\\hline 5& 0.784 & 0.747 & 0.713 & 0.681 & 0.650 &0.621 \\\hline 6& 0.746 & 0.705 & 0.666 & 0.630 & 0.596&0.564 \\\hline 7& 0.711 & 0.665 & 0.623 & 0.583 & 0.547 &0.513 \\\hline 8& 0.677 & 0.627 & 0.582 & 0.540 & 0.50 &0.467 \\\hline 9& 0.645 & 0.592 & 0.544 & 0.500 & 0.469 &0.424 \\\hline 10& 0.614 & 0.558 & 0.508 & 0.463 & 0.422 &0.386 \\ \hline\end{array}$

A) $93,460
B) $98,700
C) $101,630
D) $204,520