The benefits and costs of an investment project (the purchase of a piece of machinery) are those given in the following table. In Excel, calculate net revenue, or the revenue from the investment minus the costs; the present value coefficient for every year; and the present value of the net revenue. Add together column F to get the net present value of the project. Should the firm purchase the machine?
| End of Year |
Investment (Year 0_ and Cost |
Revenue |
Net Revenue |
Present Value Coefficient 1/(1+0.5)n |
Present Value of Net Revenue |
| 0 |
1000 |
|
|
|
|
| 1 |
200 |
600 |
|
|
|
| 2 |
300 |
800 |
|
|
|
| 3 |
300 |
800 |
|
|
|
| 4 |
400 |
800 |
|
|
|
| 4 |
|
200* |
|
|
|