A machine that costs $1,500,000 has a 3-year life.It will generate after-tax annual cash flows of $700,000 at the end of each year.It will be salvaged for $200,000 at the end of year 3.If your required rate of return for the project is 13%,what is the NPV of this investment?
A) $291,417
B) $400,000
C) $600,000
D) $338,395

Question

Quizplus · Accepted Answer

The NPV is calculated by discounting the cash flows and salvage value at the required rate of return and subtracting the initial investment. The NPV is approximately $291,417.

A Machine That Costs $1,500,000 Has a 3-Year Life