18 A company has a machine which will continue to function for the next five years, but gradually become less productive. Free cash flows for the existing machine are forecasted to be $81,198 in year 1, $59,616 in year 2, $37,675 in year 3, $10,872 in year 4 and $7,844 in year 5. A salesman is trying to convince a company to replace this machine with a new model. The replacement machine will require a net investment of $156,892 and is expected to generate free cash flow of $87,651 per year for the next 5 years. The company requires 13% return on capital investments of this sort and desires a 36-month pay back period. What is the net present value of this proposal? Enter your answer as a monetary amount rounded to four decimal places, but without the currency symbol. For example, if your answer is $90.1234, enter 90.1234. If you answer is less than zero, enter a negative value, like this: -90.1234 Type your answer...

18 A company has a machine which will continue to function for the next five years, but gradually become less productive. Free cash flows for the existing machine are forecasted to be $81,198 in year 1, $59,616 in year 2, $37,675 in year 3, $10,872 in year 4 and $7,844 in year 5. A salesman is trying to convince a company to replace this machine with a new model. The replacement machine will require a net investment of $156,892 and is expected to generate free cash flow of $87,651 per year for the next 5 years. The company requires 13% return on capital investments of this sort and desires a 36-month pay back period. What is the net present value of this proposal? Enter your answer as a monetary amount rounded to four decimal places, but without the currency symbol. For example, if your answer is $90.1234, enter 90.1234. If you answer is less than zero, enter a negative value, like this: -90.1234 Type your answer...

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 4P

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A company wants to replace a machine with a better version. The replacement machine will require a net investment of $150,951 and is expected to generate free cash flow of $87,115 per year for the next 5 years. The company requires 13% return on capital investments of this sort and desires a 24-month pay back period. The existing machine would continue to function for the next five years if it is not replaced, but gradually become less useful. Free cash flows for the existing machine are forecasted to be $92,735 in year 1, $50,802 in year 2, $34,224 in year 3, $16,607 imm year 4 and $6,488 in year 5. What is the net present value of this proposal? Enter your answer as a monetary amount rounded to four decimal places, but without the currency symbol. For example, if your answer is $90.1234, enter 90.1234. If you answer is less than zero, enter a negative value, like this: -90.1234 Type your answer...
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