A company will purchase a new machine with a cost of $750,000. The machine requires aninitial investment in net working capital of $25,000. Net working capital will remain at this levelduring the life of the machine and will be recovered at the end. The machine will be operatingfor 3 years. There is no salvage value associated with the machine. The company does not payany taxes, the tax rate is zero. The machine will produce 10,000 units per year. The price per unitwill be $30. The variable cost per unit is $7. There are fixed costs of $50,000 per year. Therequired rate of return is 12%. What is the NPV?
What is the NPV?
2) Operating cash flow Revenue
Fixed costs Computation of present value: Years 1-3
3 (10,000 units ? $30 per unit)
(10,000 units ? $7 per unit)...
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