Problem:
Ford Motor spends $2,000,000 on a new conveyor system in an old plant. It calculates that the cash flows for the next five years (profit after taxes plus depreciation) are as follows. Assuming that the equipment will be abandoned after the five year period, calculate payback and Net Present Value. The cost of capital is 10%
Year cash flow PVF PV
1 $600,000
2 $600,000
3 $500,000
4 $400,000
5 $300,000