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Calculate the net present value of the proposed investment

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Reference no: EM132529286

Northern Manufacturing Ltd. is considering the investment of $86,000 in a new machine. The machine will generate cash flow of $14,000 per year for each year of its eight-year life and will have a salvage value of $7,000 at the end of its life. The company's cost of capital is 10%.

Required:

Question 1: Calculate the net present value of the proposed investment. (Ignore income taxes.)

Question 2: What will the internal rate of return on this investment be relative to the cost of capital?

Reference no: EM132529286

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