Net present value is calculated using the following formula:
NPV = X * [(1+r)^n - 1]/[r * (1+r)^n]
here,
x=amount received per period
n= number of periods
r= rate of return
Plugging in the following figures:
Initial cost: $400,000.
Annual operating cash inflows: $100,000 each year
n= 8 years
Cost of capital: 14 %
The net present value is: 100,000,000*((1+0.14)^8-1)/(0.14*(1+0.14)^8) = $626,566.42 (rounded to the nearest cent).
Since this is higher than the initial payment, the machine is worth the initial investment.
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