Capital management

| December 8, 2015

The benefits and costs of an investment project (the purchase of a piece of machinery) are those given in the following table. In Excel, calculate net revenue, or the revenue from the investment minus the costs; the present value coefficient for every year; and the present value of the net revenue. Add together column F to get the net present value of the project. Should the firm purchase the machine?

End of Year Investment (Year 0_ and Cost Revenue Net Revenue Present Value Coefficient 1/(1+0.5)n Present Value of Net Revenue
0 1000
1 200 600
2 300 800
3 300 800
4 400 800
4 200*

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