Question
Birkenstock is considering an investment in a nylon-knitting machine. The machine requires an initial investment of $27,000, has a 5-year life, and has no residual
Birkenstock is considering an investment in a nylon-knitting machine. The machine requires an initial investment of $27,000, has a 5-year life, and has no residual value at the end of the 5 years. The companys cost of capital is 10.87%. Known with less certainty are the actual after-tax cash inflows for each of the 5 years. The company has estimated expected cash inflows for three scenarios: pessimistic, most likely, and optimistic. These expected cash inflows are listed in the following table. Calculate the range for the NPV given each scenario.
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