Question

A plastic manufacturing company has made a strategic decision to purchase a fleet of 3- D printers and use these printers to produce small and medium products for customers, instead of using traditional injection-mold techniques. Your Project Manager has projected that the new system will reduce labor costs by $36,000 each year over the next five years (Years 1-5). The purchase price (including installation and testing) of the new 3-D printers is $92,700. At the end of the project, the printers will be sold in the secondary market for $17,500. What is the net present value of this investment if the discount rate is 10.75% per year

Answer 1

$51,696.44

Step-by-step explanation:

Net present value is the present value of after-tax cash flows from an investment less the amount invested.

NPV can be calculated using a financial calculator

Cash flow in year 0 = $-92,700

Cash flow each year from year 1 to 4 = $36,000

Cash flow in year 5 = r $17,500 + $36,000 = $53,500

I = 10.75%

NPV = $51,696.44

To find the NPV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute