Business, 21.02.2020 04:42, BARRION1981

A machine would cost $100,000, and would generate revenues of $21,000 per year. However, O&M costs would be $7,000 per year. The machine would last 10 years and your MARR is 7% annual rate compounded annually. (a) What is the net present value of this potential investment? (b) Should you invest in this machine? Give one sentence answer for why or why not.

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answered: anaroles04

(a) What is the net present value of this potential investment?

Net present value of Investment is $(3,903)

(b) Should you invest in this machine?

We should not invest in this investment because Net present value of this investment is negative by discounting Minimum acceptable rate of return.

Explanation:

Present Values:

Revenue $144,146

O&M Cost ($48,049)

Initial Investment $(100,000)

Net Present value $(3,903)

Working :

Present Value Calculation = P x ( (1- ( 1 + r )^-10) / r

Revenue = $21,000 x ( (1- ( 1 + 0.075 )^-10) / 0.075 = 144,146

O&M Costs = $7,000 x ( (1- ( 1 + 0.075 )^-10) / 0.075 = 48,049

answered: pmdm95

A) NPV = -1669.6

B) Since this value is negative, the machine should not be invested in because the cash outflow is greater than the inflow.

Explanation:

The question is to determine whether we should invest in the machine or not using the net present value formula for calculation as follows:

Step 1: We determine the Net present Value of the annual receipts

=The Revenue expected yearly - the Costs incurred yearly

= $21,000 - $7,000

= $14,000

Based on this estimated amount, we then determine the present values of the cash flow as follows

To do this, we use the Present Value Interest Factors for a One-Dollar Annuity Table

We use 7% annual rate and 10 year period. We plug this into the table and get 7.0236

Also, using this formula we arrive at the same figure PVIFA = [1 - 1/(1 + k)n] / k

Based on the figure:

The present Value of the cash flow for 10 years

= $14,000 x (the Present Value of Annuity determined above)

= $14,000 x 7.0236

= $98,330.4

Finally, the Net present Value

= The Present Value of Cash inflows - The initial cost of the machine

= $98,330.4 - $100,000

= -1669.6

Since this value is negative, the machine should not be invested in because the cash outflow is greater than the inflow.

answered: Guest

The federal reserve took an expansionary approach during the crisis. this was done by expanding the money supply and boosting liquidity. this can be seen in the fed's actions of lending to banks, purchasing securities, and lowering the federal funds rate in order to lower overall interest rates. the fed's goal was to increase consumer spending and overall liquidity within the system, and they pursued this by expanding the supply of liquid money.

answered: Guest

Asolar eclipse occurs when the moon gets between earth and the sun, and the moon casts a shadow over earth. a solar eclipse can only take place at the phase of new moon, when the moon passes directly between the sun and earth and its shadows fall upon earth's surface.

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A machine would cost $100,000, and would generate revenues of $21,000 per year. However, O&M cos...