Brew Ltd$.$ introduced a new product, DV$,$ to its range last year. The machine used to mould each item is a bottleneck in the production process meaning that a maximum of $5,000$ units per annum can be manufactured.

Year $0$

$$000$

Year $1$

$$000$

Year $2$

$$000$

Year $3$

$$000$

Year $4$

$$000$

Investment

$(20)$

Income

$65$

$155$

$200$

$(20)$

Operating Cost

$(71)$

$(127)$

$(155)$

$(15)$

No terminal value or machinery scrap value is expected at the end of four years, when production of DV is planned to end. For investment appraisal purposes, Brew Ltd$.$uses a nominal $($money$)$ discount rate of $10\%$per year calculate net present value

Question $1$Answer

a$.$

$$7750$

b$.$

$$5770$

c$.$

$$7570$

d$.$

$$8750$