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

  1. A firm considers to buy 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

  1. Find the net present value of this investment using a discount rate of 18%
  2. Should the firm accept or reject this investment (write accept or reject as your answer) ?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

2) Let us consider the same investment whose cost and expected cash flows are given in Question 1 using discounted payback period. a) What is the exact payback period of that investment according to...

Q:

no excell 23 2) Let us consider the same investment whose cost and expected cash flows are given in Question 1 using discounted payback period. a) What is the exact payback period of that investment...

Q:

A firm considers to buy 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:...

Q:

4 Notice that I want to see the exact payback period which means you need to use interpolacon. See my wnitten notes to tand how the interpolation is done. 23 2) Let us consider the same investment...

Q:

A firm considers to buy 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:...

Q:

A firm considers to buy 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:...

Q:

A firm considers to buy 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:...

Q:

3) A firm considers to buy 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:...

Q:

A firm considers to buy 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:...

Q:

3) A firm considers to buy 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:...

Q:

How is the initial measurement of a financial liability determined and how does it differ to the initial measurement of a financial asset?

Q:

GASB Statement No. 34 has been widely criticized for mandating the preparation and presentation of government-wide statements. Mainly, the critics contend that the benets of the statements are not...

Q:

The firm because it's dividend pay out ratio as a result you know that the firm return on assets to increase earning retention ratio will increase earning growth rate will fall stock price will fall

Q:

Section 2: Case Study: Food Fight Stanley Donaldson has been running a large farm near Gingin on Perth's urban fringe for over 30 years. There he grows a variety of fruit and vegetables for the Perth...

Q:

Message Strategies: Analytical Reports An observer surveying the current consumer electronics landscape and seeing Apple products everywhere might be surprised to learn that during part of the...

Q:

Be sure to read How to Sell by Listening in this months issue of Fortune.

Q:

Message Strategies: Proposals [LO-1] [LO-5] It seems like everybody in your firm is frustrated. On the one hand, top executives complain about the number of lower-level employees who want promotions...