Your buddy in mechanical engineering has invented a money machine. the main drawback of the machine is that it is slow. it takes one year to manufacture $ 700. however, once built, the machine will last forever and will require no maintenance. the machine can be built immediately, but it will cost $ 12 comma 100 to build. your buddy wants to know if he should invest the money to construct it. if the interest rate is 5.5 % per year, what should your buddy do? what is your advice if the machine takes one year to build?

NPV of machine is - $624.27

your buddy should not take up the project

in case NPV at year 0 will be negative and hence the project should be rejected

Explanation:

given data

one year to manufacture = $700

cost =  $12,100

interest rate = 5.5 %

solution

we consider here in year 0 machine is built and Machine cost = $12,100

and at the end of year 1 cash flow = $700

so this cash flow is perpetual

and

PV of cash flow =

PV of cash flow =

PV of cash flow = $12727.27

so

NPV will be

NPV = PV of cash flow - Machine cost

NPV = $12727.27 - $12100

NPV =  - $624.27

so NPV of machine is - $624.27

Since NPV is negative, your buddy should not take up the project.

and

If the machine takes one year to build then NPV at the end year1 = -$624.27

so here in case NPV at year 0 will be negative and hence the project should be rejected

(i know i'm late but the answer's "things about yourself" because you want to list things you're capable of, why you want to open up the business, the amount of money you're putting into it,etc.) i'm guessing you take online school small business, the answers to the quizzes are all over quizlet. just look up your question and type quizlet after it and it'll pop up.