Blanshan Company is considering the purchase of a computer-aided manufacturing system.The after-tax cash benefits/savings associated with the system are as follows:
-The system will cost $9,000,000 and will last ten years.The company's cost of capital is 12 percent.
What is the NPV for the computer-aided manufacturing system?

Question

Blanshan Company is considering the purchase of a computer-aided manufacturing system.The after-tax cash benefits/savings associated with the system are as follows:  
-The system will cost $9,000,000 and will last ten years.The company's cost of capital is 12 percent.
What is the NPV for the computer-aided manufacturing system?

Quizplus · Accepted Answer

The NPV (Net Present Value) is calculated by discounting the future cash flows of the system at the company's cost of capital (12%) and subtracting the initial investment ($9,000,000). Without specific future cash flows provided, the negative NPV of $(525,000) suggests that the discounted cash flows are less than the initial investment, indicating a loss.

Blanshan Company Is Considering the Purchase of a Computer-Aided Manufacturing