Briarcrest Condiments is a spice-making firm. Recently, it developed a new process for producing spices. The process requires new machinery that would cost $1,931,443. have a life of five years, and would produce the cash flows shown in the following table.
Year |
Cash Flow |
1 |
$492,099 |
2 |
-276,291 |
3 |
869,296 |
4 |
1,073,276 |
5 |
810,915 |
What is the NPV if the discount rate is 14.35 percent? (Enter negative amounts using negative sign e.g. -45.25. Round answer to 2 decimal places, e.g. 15.25.)
NPV is |
$ |
. |
Accepted or rejected?
Bell Mountain Vineyards is considering updating its current manual accounting system with a high-end electronic system. While the new accounting system would save the company money, the cost of the system continues to decline. The Bell Mountain’s opportunity cost of capital is 12.2 percent, and the costs and values of investments made at different times in the future are as follows:
Year |
Cost |
Value of Future Savings |
|
0 |
$5,000 |
$7,000 |
|
1 |
4,250 |
7,000 |
|
2 |
3,500 |
7,000 |
|
3 |
2,750 |
7,000 |
|
4 |
2,000 |
7,000 |
|
5 |
1,250 |
7,000 |
|
Calculate the NPV of each choice. (Round answers to the nearest whole dollar, e.g. 5,275.)
The NPV of each choice is:
NPV0 = $.