Question: A firm considers buying a new machine whose expected lifetime is 6 years. The cost of the machine is $ 3 000 000 which is

A firm considers buying a new machine whose expected lifetime is 6 years. The cost of the machine is $ 3 000 000 which is paid in 2020. The expected cash flows of this investment are as follows:

2021: $ 700 000

2022: $ 800 000

2023: $ 1 200 000

2024: $ 1 300 000

2025: $ 900 000

2026: $ 600 000

a)Find the net present value of this investment using a discount rate of 18%

b)Should the firm accept or reject this investment (write accept or reject as your answer)?

c)What is the expected contribution of that investment to the value of the firm (give a numerical answer)?

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