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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:
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?
Year 1 2 Cash inflow $400,000 $375,000 $300,000 $350,000 $200,000 3 4 5Step by Step Solution
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