In case of replace equipment what we can say about net present value rule?
In case of replace equipment what we can say about net present value rule?
Homework Answers
Net present value (NPV) is the difference of present value of future cash flows and initial investment.
In case of equipment, there must be some future costs like maintenance cost, repairing cost, etc. Present value of these future costs would be negative. Therefore, NPV would also be negative.
NPV rules:
No.1) If NPV of the old car is more negative than the new car the old car must be replaced.
No.2) If NPV of the new car is more negative than the old car the old car must not be replaced.
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In case of replace equipment what we can say about net present
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my question is Q1, payback periods ans net present value,
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