The production machinery of Xaghogh is nearing the end of its useful life and it needs tobe replaced. Forecasts have been made for the initial capital cost, proportional sales incomeand operating costs of the replacement machine, which is expected to have a useful life ofthree years:Initial investmentCash flowsYear1230Sales income$280,000$330,000$390,00023The company appraises capital investment projects using a cost of capital of 10% per annum.What is the NPV of this machine? The Discount factor of 10% is as followsYear DF1.000$500,0000.9090.8260.751Operating costs$100,000$120,000$130,000

Net present value is the difference between the present value of cash flow and initial investment of…

The production machinery of Xaghogh is nearing the end of its useful life an be replaced. Forecasts have been made for the initial capital cost, proportion and operating costs of the replacement machine, which is expected to have a three years: Initial investment Cash flows Year Sales income 1 2 3 $280,000 $330,000 $390.000 $500,000 Operating costs $100,000 $120,000 $120.000

The production machinery of Xaghogh is nearing the end of its useful life an be replaced. Forecasts have been made for the initial capital cost, proportion and operating costs of the replacement machine, which is expected to have a three years: Initial investment Cash flows Year Sales income 1 2 3 $280,000 $330,000 $390.000 $500,000 Operating costs $100,000 $120,000 $120.000

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PB: Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated...

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