Assume a discount rate of 10 %

What is the NPV of a machine investment today of $1.000.000 for a machine 1 that will generate net annual revenue of $300.000 for four years with a salvage value of $200.000?

Calculate payback time?

Estimate IRR?

The management is being offered to buy another machine 2 with an investment of only $700.000 but this machine requires an increased maintenance cost of $100.000 per year and an additional tuning cost the first year of $50.000.

Based on NPV, would you recommend the company to buy machine 1 or machine 2?

What is the payback time for machine 2?