Monday 4 June 2012

A machine costs $1,000, has a three-year life, and has an estimated salvage value of $100.

A machine costs $1,000, has a three-year life, and has an estimated salvage value of $100. It will generate after-tax annual cash flows (ACF) of $600 a year, starting next year. If your required rate of return for the project is 10%, what is the NPV of this investment? (Round your answerwer to the nearest $10.)
A.  -$150
B.  $900
C.  $490
D.  $570

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