Question
Cullumber Industries management is planning to replace some existing machinery in its plant. The cost of the new equipment and the resulting cash flows are
Cullumber Industries management is planning to replace some existing machinery in its plant. The cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses an 18 percent discount rate for projects like this. Should management go ahead with the project?
| Year | Cash Flow | |
|---|---|---|
| 0 | -$3,505,700 | |
| 1 | 831,310 | |
| 2 | 1,013,300 | |
| 3 | 1,233,700 | |
| 4 | 1,283,660 | |
| 5 | 1,512,800 |
What is the NPV of this project?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To calculate the Net Present Value NPV of the project we will discount each cash flow to the present ...
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Step: 2
Step: 3
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Fundamentals of Corporate Finance
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
3rd edition
1118845897, 978-1118845899
