Question
Herky Foods is considering acquisition of a new wrapping machine. By purchasing the machine, Herky will save money on packaging in each of the next
Herky Foods is considering acquisition of a new wrapping machine. By purchasing the machine, Herky will save money on packaging in each of the next 5 years, producing the series of cash inflows shown in the following table:
Year Cash Inflow
1 $400,000
2 $375,000
3 $300,000
4 $350,000
5 $200,000
The initial investment is estimated at $1.25 million. Using a 6% discount rate, determine the net present value (NPV) of the machine given its expected operating cash inflows. Based on the project's NPV< should Herky make this investment?
The net present value (NPV) of the new wrapping machine is $___.
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