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

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 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) ? d) Find the PI value (profitability index) using the cost of investment and the expected cashflows of this problem and mention if the investment is accepted or rejected.

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