Question
XYZ Company is considering purchasing new equipment costing SAR 250,000. The companys management has estimated that the equipment will generate cash flows as follows (SAR):
XYZ Company is considering purchasing new equipment costing SAR 250,000. The company’s management has estimated that the equipment will generate cash flows as follows (SAR):
| Year | Net Cash Flow | PV @10% |
| 1 | 90,000 | 0.9091 |
| 2 | 75,000 | 0.8264 |
| 3 | 85,000 | 0.7513 |
| 4 | 75,000 | 0.6830 |
The company's required rate of return is 10%.
Calculate the net present value and give reasons on whether the project should be accepted or rejected.
Step by Step Solution
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Step: 1
To calculate the net present value NPV of the project we need to discount the cash flows back to the ...
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Contemporary Engineering Economics
Authors: Chan S. Park
5th edition
136118488, 978-8120342095, 8120342097, 978-0136118480
