You are replacing an old piece of machinery with a new one that offers improved technology and efficiencies to your company. The new machine will cost you $50,000 and it will provide you with a cash inflow of $10,500 PER YEAR for the next 7 years. You can sell the old machine for $6,800 at the time of purchase for the new equipment. The cost of capital for your company is 9%. What is the NPV of the investment? What is the IRR? Do you recommend investing in the new machine?

Question

You are replacing an old piece of machinery with a new one that offers improved technology and efficiencies to your company. The new machine will cost you $50,000 and it will provide you with a cash inflow of $10,500 PER YEAR for the next 7 years. You can sell the old machine for $6,800 at the time of purchase for the new equipment. The cost of capital for your company is 9%.  What is the NPV of the investment? What is the IRR? Do you recommend investing in the new machine?

SraJMcGin · Answer

The School Subject would be accounting or business, probably, but NOT "college." You always want to name the School Subject so the right volunteer teacher reads your post. It is not I! Sra