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Liberty Textiles plans to upgrade its weaving machines. The existing machines can be sold for $60,000 now. The new machines cost $240,000 and require an

Liberty Textiles plans to upgrade its weaving machines. The existing machines can be sold for $60,000 now. The new machines cost $240,000 and require an additional $70,000 for installation.

Expected Cash Flows:

  • Year 1: $65,000
  • Year 2: $160,000
  • Year 3: $160,000

Financial Information:

  • Machine lifespan: 3 years
  • Required rate of return: 11%

Task: Calculate the NPV of this investment and suggest whether Liberty Textiles should proceed with the purchase.

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