Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $321,000 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 $1,710,000. The cost of the machine will decline by $106,000 per year until it reaches $1,180,000, where it will remain. If your required return is 13 percent, calculate the NPV today. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ 31,824.16 If your required return is 13 percent, calculate the NPV for the following years. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. A negative answer should be indicated by a minus sign.) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 NPV
Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $321,000 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 $1,710,000. The cost of the machine will decline by $106,000 per year until it reaches $1,180,000, where it will remain. If your required return is 13 percent, calculate the NPV today. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ 31,824.16 If your required return is 13 percent, calculate the NPV for the following years. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. A negative answer should be indicated by a minus sign.) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 NPV
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 4P
Question
![Your company is deciding whether to invest in a new machine. The new machine will
increase cash flow by $321,000 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 $1,710,000. The
cost of the machine will decline by $106,000 per year until it reaches $1,180,000, where
it will remain.
If your required return is 13 percent, calculate the NPV today. (Do not round
intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
NPV
$ 31,824.16
If your required return is 13 percent, calculate the NPV for the following years. (Do not
round intermediate calculations and round your answers to 2 decimal places, e.g.,
32.16. A negative answer should be indicated by a minus sign.)
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
NPV](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdb7b1c0d-31e4-4a3a-b552-6bbaf14dbd60%2Fa1ca2965-f91b-42ed-8703-56cbb1e1b432%2Ff98li3_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Your company is deciding whether to invest in a new machine. The new machine will
increase cash flow by $321,000 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 $1,710,000. The
cost of the machine will decline by $106,000 per year until it reaches $1,180,000, where
it will remain.
If your required return is 13 percent, calculate the NPV today. (Do not round
intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
NPV
$ 31,824.16
If your required return is 13 percent, calculate the NPV for the following years. (Do not
round intermediate calculations and round your answers to 2 decimal places, e.g.,
32.16. A negative answer should be indicated by a minus sign.)
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
NPV
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