1. A factory costs $800,000. You reckon that it will produce an inflow after operating costs of $170,000 a year for 10 years. If the opportunity cost of capital is 14%, what is the net present value of the factory? What will the factory be worth at the end of five years?
2. A machine costs $380,000 and is expected to produce the following cash flows:
|
Year
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
9
|
10
|
|
Cash flow($000s)
|
50
|
57
|
75
|
80
|
85
|
92
|
92
|
80
|
68
|
50
|
If the cost of capital is 12%, what is the machine's NPV?