MH い new machine will increase Cash Flow by $485,000 per Your Company is deciding whether to invest in a new machine. The the technology used in the machine has a 10 year lifear. You believe. In other words 10 years from today. The machine is currently priced at $2.95 Million. The cost of the Machine will decline by $315,000 per year until it reaches $1.375 million, where it will remain. If your required return is 8 percent, Calculate the NPV today. NPV=-Initial Investment + Annual Cash Flow x (1-(1+r) -2950,000+485000 × (1-(1+.08)^-10)=08 304389.48 x If your require retum is 8 percent, Calculate the NPV if you wait to purchase the machine until the indicated year." Annvalinkument 315,000.10.
MH い new machine will increase Cash Flow by $485,000 per Your Company is deciding whether to invest in a new machine. The the technology used in the machine has a 10 year lifear. You believe. In other words 10 years from today. The machine is currently priced at $2.95 Million. The cost of the Machine will decline by $315,000 per year until it reaches $1.375 million, where it will remain. If your required return is 8 percent, Calculate the NPV today. NPV=-Initial Investment + Annual Cash Flow x (1-(1+r) -2950,000+485000 × (1-(1+.08)^-10)=08 304389.48 x If your require retum is 8 percent, Calculate the NPV if you wait to purchase the machine until the indicated year." Annvalinkument 315,000.10.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $485000 per year. You believe the technology used in the machine has a 10 year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $2.95 million. The cost of the machine will decline by $315,000 per year until it reaches $1.375 million, where it will remain.
If your required return is 8 percent, calculate the NPV
If your required return is 8 percent, calculate the NPV if you wait to purchase the machine until the indicated year.
Transcribed Image Text:MH
い
new machine will increase Cash Flow by $485,000 per
Your Company is deciding whether to invest in a new machine. The
the technology used in the machine has a 10 year lifear. You believe.
In other words
10 years from
today. The machine is currently priced at $2.95 Million. The cost of the
Machine will decline by $315,000 per year until it reaches $1.375 million,
where it will remain.
If your required return is 8 percent, Calculate the NPV
today.
NPV=-Initial Investment + Annual Cash Flow x (1-(1+r)
-2950,000+485000 × (1-(1+.08)^-10)=08
304389.48
x
If your require retum is 8 percent, Calculate the NPV if
you wait to purchase the machine until the indicated year."
Annvalinkument 315,000.10.
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