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Alton Forge, a fabricator of hammered machine parts, wants to expand by producing larger machine parts. To do so, it needs to buy a large
Alton Forge, a fabricator of hammered machine parts, wants to expand by producing larger machine parts. To do so, it needs to buy a large power hammer. This power hammer costs $1,350,000. When the hammer is installed, Alton Forge forecasts annual cashflows of: $300,000, $375,000, 425,000, 550,000, and 650,000 for the first 5 years. Alton Forges cost of capital is 10% per year. What is the net present value of this investment? Hint: What is the present value of the future cashflows?
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