Nada Foods is considering acquisition of a new wrapping machine The initial in vestment is estimated at US$1 25 million, and the machine will have a 5 year life with no salvage value Using a 6 percent discount rate, determine the net present value (NPV) of the machine given its expected operating c...

Year Cash Inflow Present Value 1 400000 3773 ...

Nada Foods is considering acquisition of a new wrapping machine. The initial in- vestment is estimated at

Question:

Nada Foods is considering acquisition of a new wrapping machine. The initial in- vestment is estimated at US$1.25 million, and the machine will have a 5-year life with no . Using a 6 percent discount rate, determine the (NPV) of the machine given its expected operating cash inflows shown in the table following. Based on the project's NPV, should Nada make this investment?
Year Cash inflow
1............................US$400,000
2..................................375,000
3..................................300,000
4..................................350,000
5..................................200,000
Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...