Muncy Inc is looking to add a new machine at a cost of 41332

Muncy, Inc., is looking to add a new machine at a cost of $4,133,250. The company expects this equipment will lead to cash flows of $818,822, $863,275, $937,250, $1,020,110, $1,212,960, and $1,225,000 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment?

Solution

NPV = - 4,133,250 + 815,822/1.15 + 863,275/1.15^2 + 937,250/1.15^3 + 1,017,610/1.15^4 + 1,212,960/1.5^5 + 1,225,000/1.15^6

NPV = $ - 440,343. 934