You are the CFO of a manufacturing company that is considering an investment in new production equipment. The equipment has a cost of $5 million and is expected to generate annual cash flows of $1.5 million for the next five years. The equipment has a salvage value of $500,000 at the end of the fifth year. The company's cost of capital is 10%. What is the NPV of this investment rounded to the nearest thousand? Should the company invest in the equipme

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Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.