Need help with net present value please.

[tropical]

Hi, i am having trouble solving this problem and a few similar ones for school, i missed a few lessons due to a holiday and help getting on the correct path.


APA Manufacturing is considering investing in a processing machine at a cost of £57,500. The annual savings predicted, compared with the old packing method, are as follows:

Year 1	Year 2	Year 3	Year 4
£10,000	£12,000	£20,000	£20,000

After 4 years the machine will be disposed of.
The discount rate APA uses for investments such as this is 8% p.a., compounded annually.
1) Work out the NPV of this investment.
2) Should APA Manufacturing proceed with the purchase?

 

[tropical]

Please

If possible,i could really use a good walk through this process.

Thanks

 

[stapel]

Hi, i am having trouble solving this problem and a few similar ones for school, i missed a few lessons due to a holiday and help getting on the correct path.

Okay. Then the first step is to study some lessons, so you can learn the basic terms and techniques. For instance, a quick search on Google returns lessons such as this, this, this, this, and this.

APA Manufacturing is considering investing in a processing machine at a cost of £57,500. The annual savings predicted, compared with the old packing method, are as follows:

Year 1	Year 2	Year 3	Year 4
£10,000	£12,000	£20,000	£20,000

After 4 years the machine will be disposed of.
The discount rate APA uses for investments such as this is 8% p.a., compounded annually.
1) Work out the NPV of this investment.
2) Should APA Manufacturing proceed with the purchase?

Once you have studied at least two of the lessons, please attempt the exercise. If you get stuck, you can then reply with a clear statement of your thoughts and efforts so far, at which point we can provide specific assistance. Thank you!

 

[tropical]

Thank you, i got it now. I was just a little tiered/ unfocused and the tutorial i viewed didn't quiet hit the nail on the head for me. The links provided were a great help now over to liniar relationships.