A company will purchase a new machine with a cost of $750,000. The machine requires an initial investment in net working capital of $25,000. Net working capital will remain at this level during the life of the machine and will be recovered at the end. The machine will be operating for 3 years. There is no salvage value associated with the machine. The company does not pay any taxes, the tax rate is zero. The machine will produce 10,000 units per year. The price per unit will be $30. The variable cost per unit is $7. There are fixed costs of $50,000 per year. The required rate of return is 12%.

 What is the NPV?

Answer rating: 100% (QA)

To calculate the Net Present Value NPV we need to determine the cash flows generated by the machine ... View the full answer