Question
Description Amount Sale value of current equipment $90,000 Cost of new equipment $220,000 Additional working capital required $60,000 Expected additional cash inflows - Year 1
Description | Amount |
Sale value of current equipment | $90,000 |
Cost of new equipment | $220,000 |
Additional working capital required | $60,000 |
Expected additional cash inflows | |
- Year 1 | $70,000 |
- Year 2 | $160,000 |
- Year 3 | $160,000 |
Lifespan of new equipment | 3 years |
Required rate of return | 11% |
Calculate the NPV of this investment and advise whether the company should invest in the new equipment.
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Horngrens Accounting
Authors: Tracie L. Miller Nobles, Brenda L. Mattison, Ella Mae Matsumura
11th edition
978-0133851151, 013385115X, 978-0133866889
