Find the net present value of machine

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A company wants to decide whether it is worthy to buy a new machine. The machine's price is $110,000, and the machine has a terminal value of $7,000 (that is, in year 3 the company can sell the used machine for $7,000). The company's cost of capital is 6%. The project has a life-time of 3 years. The operating cash flows are as follows:

Year 1 Year 2 Year 3

Net cash flow $38,000 $39,000 $33,200

- Find the net present value of this machine (NPV).

- Should the firm buy the machine? Why yes, or why not?

Reference no: EM132507455

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