Net Present Value 1. A firm that purchases electricity from the local utility for $400,000 per year is considering installing a steam generator at a cost of $290,000. The cost of operating this...

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Answered Same DayAug 22, 2021

Answer To: Net Present Value 1. A firm that purchases electricity from the local utility for $400,000 per year...

Madhulika answered on Aug 23 2021
158 Votes
Q1
            Purchase Electricity        Installing generator
        Year    Cost        Initial cost    Operating cost    Net Cash
flow
        0    -400000        -290000    -280000    -570000
        1    -400000            -280000    -280000
        2    -400000            -280000    -280000
        3    -400000            -280000    -280000
        4    -400000            -280000    -280000
        NPV    -1541991            NPV    -1369394
        Answer    Buying the generator is a more attaractive choice since its net cost is lesser
            NPV of the better choice    -1369394
Q2
            Large...
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