Alton Forge, a fabricator of hammered machine parts, wants to expand by producing larger machine parts. To do so$,$ it needs to buy a large power hammer. This power hammer costs $$1,350,000.$ When the hammer is installed, Alton Forge forecasts annual cashflows of: $$300,000,375,000,425,000,550,000,$ and $650,000$ for the first $5$ years. Alton Forge$$s cost of capital is $10\%$ per year. What is the net present value of this investment? Hint: What is the net present value of the future cashflows?

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To calculate the Net Present Value NPV of the investment we need to discount the forecasted cash f... View the full answer