Question: Description Amount Existing machine salvage value $20,000 New machine cost $220,000 Working capital required $45,000 Year 1 additional cash inflow $55,000 Year 2 additional cash

Description

Amount

Existing machine salvage value

$20,000

New machine cost

$220,000

Working capital required

$45,000

Year 1 additional cash inflow

$55,000

Year 2 additional cash inflow

$75,000

Year 3 additional cash inflow

$95,000

Year 4 additional cash inflow

$65,000

New machine lifespan

4 years

Required rate of return

9%

  • Calculate the NPV of the investment.
  • Should the new machine be purchased?

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