Question
Herky Foods is considering acquisition of a new wrapping machine. The initial investment is estimated at $1.35 million, and the machine will have a 5-year
Herky Foods is considering acquisition of a new wrapping machine. The initial investment is estimated at $1.35 million, and the machine will have a 5-year life with no salvage value. Using a discount rate of 5%, determine the net present value (NPV) of the machine given its expected operating cash inflows shown in the following table
| Year | Cash inflow |
| 1 | $432,000 |
| 2 | $405,000 |
| 3 | $324,000 |
| 4 | $378,000 |
| 5 | $216,000 |
Based on the project's NPV, should Herky make this investment?
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Production And Operations Analytics
Authors: Steven Nahmias, Tava Lennon Olsen
8th Edition
1478639261, 9781478639268
