Question - The management of ABC Corporation is considering the purchase of a new machine costing $430,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation by using the NPV methodology calculations:
|
Year
|
Income from Operations
|
Net Cash Flow
|
|
1
|
$100,000
|
$180,000
|
|
2
|
40,000
|
120,000
|
|
3
|
20,000
|
100,000
|
|
4
|
10,000
|
90,000
|
|
5
|
10,000
|
90,000
|
What is the net present value for this investment is? Should it be accepted?