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Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and sell more product. The machine cost $
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Answer #1

Let the cash flows in Year n be CFn

Given,

CF0 = -1270000
CF1 = 774213
CF2 = 774213
CF3 = 774213
CF4 = 774213
CF5 = 774213

Cost of Capital = r = 9.19%

Hence, NPV = -CF0 + CF1/(1+r) + CF2/(1+r)2 + CF2/(1+r)3 + CF4/(1+r)4 + CF5/(1+r)5

= -1270000 + 774213/(1+0.0919) + 774213/(1+0.0919)2 + 774213/(1+0.0919)3 + 774213/(1+0.0919)4 + 774213/(1+0.0919)5

= $1,726,631.02

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