Question

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 $817,822, $863,275, $937,250, $1,019,610, $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?

Answer 1

NPV is $ 437461.30
Explanation
Year	Cost	Cash flows	Total	Discount factor @15%	Present value(Total*discount factor)
0	$ (4,133,250.00)		$ (4,133,250.00)	1.000	$ (4,133,250.00)
1		$      817,822.00	$       817,822.00	0.870	$       711,149.57
2		$      863,275.00	$       863,275.00	0.756	$       652,759.92
3		$      937,250.00	$       937,250.00	0.658	$       616,257.09
4		$ 1,019,610.00	$    1,019,610.00	0.572	$       582,965.33
5		$ 1,212,960.00	$    1,212,960.00	0.497	$       603,055.49
6		$ 1,225,000.00	$    1,225,000.00	0.432	$       529,601.30
NPV					$     (437,461.30)
Discount factor formula=1/(1+discount factor)^year