A new, more efficient machine will last 4 years and allow inventory levels to decrease by $100,000 over its life. At a cost of capital of 13%, how does the net working capital change affect the project's NPV?
A) NPV increases by $38,668.13.
B) NPV increases by $61,330.09.
C) NPV will not change.
D)NPV increases by $100,000.

Question

Quizplus · Accepted Answer

ΔNPV = $100,000 - $100,000/1.13⁴ = $38,668.13

A New, More Efficient Machine Will Last 4 Years and Allow