Question: How to compute for Net Present Value in this problem? The answer is already given but im quite confused with the NPV. Thank you Option

How to compute for Net Present Value in this problem? The answer is already given but im quite confused with the NPV. Thank you

How to compute for Net Present Value in this problem? The answer

Option 1: Purchase the CNC Machine with Cash Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Inflows Gross Revenue $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000 Salvage value 40,000 Total Inflows 600,000 600,000 600,000 600,000 640,000 Outflows Initial purchase (142,000) Cost of Goods Sold (390,000) (390,000) (390,000) (390,000) (390,000) Operating Costs (120,000) (120,000) (120,000) (120,000) (120,000) Total Outflows (142,000) (510,000) (510,000) (510,000) (510,000) (510,000) Overall Cashflow $ (142,000) $ 90,000 $ 90,000 $ 90,000 $ 90,000 $ 130,000 Net Present Value: $ 238,820 Payback Period 1.58 years Discount Rate 7%

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