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streetthunder
olden Corporation is considering the purchase of new equipment costing $200,000. The expected life of the equipment is 10 years. It is expected that the new equipment can generate an increase in net income of $35,000 per year for the next 10 years. After-tax After tax Probabilities Net Income Recession .3 (15000) Normal .5 25000 Boom .2 35000 Golden's cost of capital is 14%. What is the expected NPV? Should they purchase the new equipment?
N.P.V. is an acronym for NET PRESENT VALUE. With that said, the higher the NET PRESENT VALUE the better the return. To calculate NET PRESENT VALUE, go here: http://www.investopedia.com/calculator/netpresentvalue.aspx