You are the CFO of a manufacturing company that is

considering an investment in new production equipment,

The equipment has a cost of $$5$ million and is expected

to generate annual cash flows of $$1\mathrm{.}5$ million for the next

five years. The equipment has a salvage value of $$500,000$

at the end of the fifth year. The company's cost of capital

is $10\%.$ What is the NPV of this investment rounded to

the nearest thousand? Should the company invest in the

equipment?

a$.$ $$900,000$; Yes

b$.$ $$1,0000,000$; Yes