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2) NPV:
CF0 = $-212,500
CF1 = $53,000
CF2 = $63,200
CF3 = $52,150
CF4 = $46,200
CF5 = $45,350
CF6 = $41,100
CF7 = $36,000
CF8 = $36,000
Rate = 11%
NPV = 36,955
NPV takes into consideration the future cash flows by the new machine and discounts them at a pre-determined rate to get a value called the net present value. A positive net present value means that the new machine will generate a net gain in wealth. ... Any value lower than 1. ... Second it ignores the time value of money. ... The discounted payback method takes into account the time value of money. ... The discounted payback period is the time it takes for the present value of a projects cash flow to equal the cost of the investment. ... Discount rate at which net NPV investment is zero. ...
8) The net present value profile shows present values compared to their cost of capital. ... Net present value is 0 at the internal rate of return. ...
In this project the there is a net initial outlay followed by a cash inflow then in the 2nd year there is a net cash outflow again. This will cause the graph to look like a bell shape where the net present value is 0 at two different points on the graph. Because of this the graph in the early percentages will have an increase in value as they increase reaching a max around 62% and falling back down to zero at 300%.
Approximate Word count = 1106
Approximate Pages = 4.4
(250 words per page double spaced)
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