Answered

A machine costs $1,000 and has a 3-year life. the estimated salvage value at the end of three years is $100. the project is expected to generate after tax-cash flows of $600 per year. if the required rate of return is 10%, what is the npv of the project? (do not round intermediate computations. round final answer to the nearest whole number.)

Answer :

jushmk
Cost of machine = $1,000

[tex]NPV of revenues = p( \frac{1- (1+RoR)^{-n} }{RoR} )[/tex] = [tex]600( \frac{1- (1+0.1)^{-3} }{0.1} )[/tex] = $1,492.11

[tex]NPV of salvage value = FV ( \frac{1}{ (1+RoR)^{n} } [/tex] )= [tex]100( \frac{1}{ (1+0.1)^{3} } )[/tex] = $75.13

Total NPV = -1000+1492.11+75.13 = $567.24 ≈ $567

Other Questions