Mayberry Textiles Inc. is considering the purchase of a new machine which has an initial cost...
Mayberry Textiles Inc. is considering the purchase of a new machine which has an initial cost of $400,000. Annual operating cash inflows are expected to be $100,000 each year for eight years. No salvage value is expected at the end of the asset's life. Mayberry's cost of capital is 14 percent.
Compute the net present value of the machine. (Ignore income taxes)
*Minimum of 400 words* Please explain answer
Homework Answers
Consider the cash flows from
the machine and discount it and consider the Present value of the
machine. Since the machine is having a positive Net Present Value
then, ithe machine can be accepted. Otherwise, if the NPV of the
machine is Negative then the machine should be Rejected.
In this case the machine should be accepted.
If you have any doubts please comment on the answer
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