Determine the minimum annual net cash flow

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Problem - Sensitivity analysis: San Lucas Corporation - San Lucas Corporation is considering investment in robotic machinery based upon the following estimates:

Cost of robotic machinery $4,000,000

Residual value 300,000

Useful life 10 years

a. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of $700,000.

b. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of $500,000, $700,000, and $900,000.

c. Determine the minimum annual net cash flow necessary to generate a positive net present value, assuming a desired rate of return of 10%. Round to the nearest dollar.

d. Interpret the results of parts (a), (b), and (c).

Reference no: EM132767748

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