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Net present value

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A company is considering an investment in a machine that costs $54,000 and would result in cash savings of $15,000 per year for 5 years. The company's cost of capital is 10%. Compute the Net Present Value.

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Solution Summary

This provides an example of computing net present value.

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  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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  • "Thank you, this helped a lot. I was not sure how to plug in those numbers to a formula. This was a great help. Now I have to figure out how to explain cost of capital is used in net present value analysis, and how cost of capital is used in net present value analysis. This stuff gets confusing."
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