pany is considering the purchase of a new bubble packaging machine. If the machine will provide $15,000 annual savings for 12 years and can be sold for $48,000 at the end of the period, what is the present value of the machine investment at a 15% interest rate with savings realized at year end

Present Value = $74,018.97

Explanation:

Giving the following information:

The machine will provide $15,000 annual savings for 12 years and can be sold for $48,000 at the end of the period.

Interest rate = 15%

To determine the present value of the savings, first, we need to determine the future value at the rate provided.

We need to use the following formula:

FV = {A*[ (1+i) ^n-1]}/i

A = annual save

FV = {12,000*[ (1.15^12) - 1]} / 0.15

FV = 348,020 + 48,000 = $396,020

Now, we can calculate the present value:

PV = FV / (1+i) ^n

PV = 396,020/1.15^12 = $74,018.97