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Jacob manages a cloth manufacturing firm. He is deciding whether or not to invest in new machinery. The machinery costs $45,000 and is expected to
Jacob manages a cloth manufacturing firm. He is deciding whether or not to invest in new machinery. The machinery costs $45,000 and is expected to increase cash flows in the first year by $25,000 and in the second year by $30,000. The firm's current fixed costs are $19,000 and current marginal costs are $15. The firm currently charges $18 per unit. If the interest rate is 8% then what is thenet present valueof the associated cash flows?Show your calculation clearly.
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