A company is considering a $240,000 investment in machinery with the following net cash flows. The company requires a 9% return on its investments. Initial investment Required rate of return Required: $240,000 9% (a) Compute the net present value of this investment. Present Value of Net Period 1 Net Cash Flows Cash Flows $53,000 $48,624 20 49,000 41,242 3 136,000 105,017 4 78,000 55,257 5 61,000 39,646 Totals $377,000 $289,786 (240,000) $49,786 Initial investment Net present value Verify the value of cell C18 using the NPV function (b) Should the machinery be purchased? Yes

A company is considering a $240,000 investment in machinery with the following net cash flows. The company requires a 9% return on its investments. Initial investment Required rate of return Required: $240,000 9% (a) Compute the net present value of this investment. Present Value of Net Period 1 Net Cash Flows Cash Flows $53,000 $48,624 20 49,000 41,242 3 136,000 105,017 4 78,000 55,257 5 61,000 39,646 Totals $377,000 $289,786 (240,000) $49,786 Initial investment Net present value Verify the value of cell C18 using the NPV function (b) Should the machinery be purchased? Yes

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 13E: Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a...

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