What is the net present worth or npw of this investment

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Reference no: EM13202518

The XYZ Corporation is planning to purchase an extruder. The purchase price of the extruder is $350,000. The company plans to make a down payment of 25% of the first cost of the extruder and to make a 7-year, 10%, yearly payment loan for the rest of the first cost of the extruder. XYZ believes that the extruder can be sold for $75,000 at the end of its 15-year service life.
The new extruder will increase the company's annual income by $90,000. Maintenance and operating costs are expected to be $4,000 during the first year and to increase by $1,200 each year. XYZ uses a MARR of 12% for its preliminary economic studies. What is the net present worth (NPW) of this investment to XYZ?
Hint: You should use 10% to estimate the loan payments and you need to use the company MARR as the interest rate while calculating the NPW. Companies use a minimum attractive rate of return (MARR) to evaluate projects.

Reference no: EM13202518

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