Question

Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and sell more product. The machine cost $1.27 million and create incremental cash flows of $688,502.00 each year for the next five years. The cost of capital is 8.17%. What is the net present value of the J-Mix 2000?

Answer 1

Year	Cash flows of J-Mix 2000	Discount [email protected]%	Present [email protected]%
-	(1,270,000.00)	1.00	(1,270,000.00)
1.00	688,502.00	0.92	636,499.95
2.00	688,502.00	0.85	588,425.58
3.00	688,502.00	0.79	543,982.23
4.00	688,502.00	0.73	502,895.66
5.00	688,502.00	0.68	464,912.32
	NPV		1,466,715.75

NPV is the present value of cash inflows less present value of cash outflows.