(Answered) Jeremy limited wishes to expand its output by purchasing a

Finance

Jeremy limited wishes to expand its output by purchasing a new machine worth 170,000 and installation costs are estimated at 40,000/=. In the 4th year, this machine will call for an overhaul to cost 80,000/=. Its expected inflows are:

Shs.

Year 1 60,000

Year 2 72,650

Year 3 35,720

Year 4 48,510

Year 5 91,630

Year 6 83,715

This company can raise finance to purchase machine at 12% interest rate.

Compute NPV and advise management accordingly.

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