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What is the net present value of the system

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Reference no: EM133184547

Question - A company is considering the purchase of a new machine. The cost of the system is $80,000 and its expected life is 5 years. During that time, the system will generate annual cost savings of $22,000. An upgrade will be performed on the system at the end of the third year at a cost of $15,000.

Required -

(a) What is the payback period of the system?

(b) Assuming the cost of capital is 8% p.a., what is the net present value of the system to the nearest whole dollar?

Reference no: EM133184547

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