Question

Your firm owns a large earth-moving machine and has contracts to move the earth for $1 per cubic yard. For $100,000, this machine may be modified to increase its production output by an extra 10 yd-per hour with no increase in operating costs. The earth-moving machine is expected to last another 8 years, with zero salvage value at the end of that time. Deter­mine whether this investment meets the company objective of earning at least 15% return. Assume that the equipment works 2,000 hours per year.

Answer 1

Net Present Value