What is the approximate net present value of a machine that will save you $13,310 in each of the next three years, if the real interest rate stays at i = 10% during that period?

Question

Quizplus · Accepted Answer

The net present value (NPV) is calculated by discounting each of the future cash flows back to the present value using the formula: NPV = Σ (Cash flow / (1 + i)^t). For this problem, NPV = $13,310/(1.1)^1 + $13,310/(1.1)^2 + $13,310/(1.1)^3 = $12,100 + $11,000 + $10,000 = $33,100 approximately.

What Is the Approximate Net Present Value of a Machine