You wish to introduce a new machine. The upfront R&D cost will be $1 million each in years 1 and 2, and then you expect to get cash flows of $0.5 million each year starting in year 3 for 3 years. Should you allocate money to this venture? The rate on a similar substitute is 10%. Hint: you should allocate the money if the present value is positive!

Answer rating: 100% (QA)

To determine whether you should allocate money to this venture you need to calculate the net present ... View the full answer