Xavier co. wants to purchase a machine for $37,000 with a four year life and a $1,000 salvage value. xavier requires an 8% return on investment. the expected year-end net cash flows are $12,000 in each of the four years. what is the machine's net present value (round to the nearest whole dollar)?

The machine's net present value is $3,481. The net present value is a method of calculating the present value of return of an investment either in capital purchases or projects. The net present value amount is acquired by subtracting the $ 37,000 initial investment from the net present value of $12,000 net cash flow for four years plus the present value of $1000 salvage value at the end of the 4th year.

Net Present Value = Present value of net cash flow + Present value of salvage value - Initial investment

$3,481 = $39,746 + $735 - $37,000