A company is evaluating the feasibility of investing in machinery to manufacture an automotive component. It would need to make an investment of $520,000 today, after which, it would have to spend $8,000 every year starting one year from now, for eight years. At the end of the period, the machine would have a salvage value of $13,000. The company confirmed that it can produce and sell 8,900 components every year for eight years and the net return would be $12.70 per component. The company's required rate of return is 7.00%. a. What is the Net Present Value (NPV) of this investment option? b. Is the investment option feasible? Yes No
A company is evaluating the feasibility of investing in machinery to manufacture an automotive component. It would need to make an investment of $520,000 today, after which, it would have to spend $8,000 every year starting one year from now, for eight years. At the end of the period, the machine would have a salvage value of $13,000. The company confirmed that it can produce and sell 8,900 components every year for eight years and the net return would be $12.70 per component. The company's required rate of return is 7.00%. a. What is the Net Present Value (NPV) of this investment option? b. Is the investment option feasible? Yes No
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 5P
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OLA#10.4
A company is evaluating the feasibility of investing in machinery to manufacture an automotive component. It would need to make an investment of $520,000 today, after which, it would have to spend $8,000 every year starting one year from now, for eight years. At the end of the period, the machine would have a salvage value of $13,000. The company confirmed that it can produce and sell 8,900 components every year for eight years and the net return would be $12.70 per component. The company's required rate of return is 7.00%.
a. What is the Net Present Value (NPV) of this investment option?
b. Is the investment option feasible?
Yes
No
Kindly use all the decimals DO NOT ROUND
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