Sigma is thinking about purchasing a new clam digger for $14,000.The expected net cash flows resulting from the digger are $9,000 in year 1, $7,000 in the 2nd year, $5,000 in the 3rd year, and $3,000 in the 4th year.Should Sigma purchase this digger if its cost of capital is 12 percent?
A)Yes, NPV = $3,176
B)Yes, NPV = $5,084
C)Yes, NPV = $16,605
D)Yes, NPV = $19,084

Question

Quizplus · Accepted Answer

NPV = $9,000(0.893) + $7,000(0.797) + $5,000(0.712) + $3,000(0.636) - $14,000 = $5,084

Sigma Is Thinking About Purchasing a New Clam Digger for $14,000.The