Compute the Net Present Value (NPV) for a machine, that a company buys if:

1. The machine costs $165,000 (useful life: 7 years, salvage value: $15,000) and would have cash sales of $124,000 and cash costs of $80,000 each year during its useful life. It would require $20,000 of working capital which is released at the end of the period.

2. The discount rate of the company is 12% and the tax rate is 20%. Normally the company gets its investment back in 4.5 years.

Answer rating: 100% (QA)

SOLUTION To calculate the Net Present Value NPV for the machine we need to discount the cash flows to their present value and then subtract the initial investment Lets calculate the NPV for both quest... View the full answer