Question
Your buddy in mechanical engineering has invented a money machine. The main drawback of the machine is that it is slow. It takes one year
Your buddy in mechanical engineering has invented a money machine. The main drawback of the machine is that it is slow. It takes one year to manufacture
$100. However, once built, the machine will last forever and will require no maintenance. The machine can be built immediately, but it will cost
$1,000 to build. Your buddy wants to know if he should invest the money to construct it. If the interest rate is 10.5% per year, what should your buddy do? What is your advice if the machine takes one year to build?
The NPV of the machine is $ .
(Round to the nearest dollar.)
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