A new machine costs $400,000. It generates an after-tax inflow of $100,000 for 8 years with the opportunity cost being 14%. The income each year has to be discounted at a rate equal to the opportunity cost and added for all the eight years.

The net present value = net...

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A new machine costs $400,000. It generates an after-tax inflow of $100,000 for 8 years with the opportunity cost being 14%. The income each year has to be discounted at a rate equal to the opportunity cost and added for all the eight years.

The net present value = net inflow-net outflow

Net outflow = $100000

Net inflow = (100,000/1.14)+(100,000/1.14^2)+(100,000/1.14^3)+(100,000/1.14^4)+(100,000/1.14^5)+(100,000/1.14^6)+(100,000/1.14^7)+(100,000/1.14^8)~$463,886

NPV = $463,886 - $400,000 = $63,886

The net present value is approximately $63,886