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 Revenue NE PV Coefficient 1/(1+0.5)n PVNR
0 1000 ----
1 200 600
2 300 800
3 300 800
4 400 800
4 --- 200 (salvage value)