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Calculate the NPV of a machine that is bought for $5,000, sold at the end of year 5 for $2,500, and produces the following cash
Calculate the NPV of a machine that is bought for $5,000, sold at the end of year 5 for $2,500, and produces the following cash flows: year 1) +$700; year 2) +$600; year 3) +$500; year 4) +$400; year 5) +300, assuming the cost of capital is 6%.
I am using excel to solve the problem, I have the cash flows set up as follows
year | $ | |
0 | 5000 | |
1 | 700 | |
2 | 600 | |
3 | 500 | |
4 | 400 | |
5 | 300 |
I calculated the NPV using the excel formula (2,155.20) but where do I go from here and how does the 5000 factor in? Do I subtract it from the NPV total?
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