Question
A company is considering investing in new manufacturing equipment that costs $500,000 and has a useful life of 10 years. The equipment is expected to
A company is considering investing in new manufacturing equipment that costs $500,000 and has a useful life of 10 years. The equipment is expected to generate annual cash flows of $100,000 and have a salvage value of $50,000 at the end of its useful life. Calculate the net present value (NPV) of the investment at a discount rate of 8%. Discuss the significance of NPV analysis in evaluating investment opportunities and how it helps in capital budgeting decisions. Explore the factors that can affect NPV and strategies for improving project profitability.
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