Question

You have the opportunity to invest in a new technology that will cost $2,000,000 (now, at time zero). The machine will generate cash flows of $1,000,000 at the end of years 1-5 and require maintenance costs of $100,000 at the beginning of years 1-5. The relevant discount rate is 12%.
Required:
a.) draw a time line depicting the project's cash flows;
b.) calculate the value of the project's cash benefits net of its costs (the project's net present value, or NPV);
c.) based on the project's NPV, should you invest in the new technology?


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  • CreatedAugust 07, 2015
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