Calculate the net present value of the mill

Reference no: EM131943191

Question: 1. A tractor and mower costs $28,000. At the present time. You can earn a net return of $6,700 at the ends of years 1 through 6. The equipment will be worth $4,000 when you are done using it at the end of year 6. Calculate the net present value of the tractor- mower investment using a discount rate of 8%.

2. A saw mill for cutting wood costs $24,000 at the present time. You can earn a net return of $6,800 at the end of year 1, $7,000 at the end of year 2, $7,200 at the end of year 3, and $7,300 at the end of year 4. The equipment will be worth $7,500 when you are done using it at the end of year 4. Calculate the net present value of the mill using a discount rate of 8%.

3. Based on NPV, which investment looks better? Explain why this comparison is not a good idea.

Reference no: EM131943191

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