Big​ Steve's, makers of swizzle​ sticks, is considering the purchase of a new plastic stamping machine.  This investment requires an initial outlay of ​$90,000 and will generate net cash inflows of ​$20,000 per year for 8 years. If the discount rate is 7 ​percent, then the​ project's NPV is ​$

The formula to calculate the Net Present Value (NPV) is:

\[
NPV = \sum \left( \frac{R_t}{(1 + r)^t} \right) - C_0
\]

Where:
- $R_t$ = net cash inflow in year $t$
- $r$ = discount rate
- $t$ = year (from 1 to the duration of the project)
- $C_0$ = initial outlay

Given:
- Initial outlay ($C_0$) = $90,000
- Cash inflows ($R_t$) = $20,000 per year
- Discount rate ($r$) = 7% or 0.07
- Duration = 8 years

We can break this into two steps:
1. Calculate the present value of each year's cash inflows.
2. Subtract the initial outlay from the total present value of the inflows to get the NPV.

I'll calculate this now.The Net Present Value (NPV) of the project is approximately **$29,426**.

Would you like more details on this calculation or any clarifications?

Here are 5 related questions for further exploration:
1. How does the NPV change if the discount rate increases or decreases?
2. What is the Internal Rate of Return (IRR) for this project?
3. How would an increase in cash inflows affect the NPV?
4. What are the risks associated with the discount rate assumption?
5. How does NPV compare to other project evaluation methods like Payback Period or IRR?

**Tip:** A positive NPV suggests that the project is expected to add value to the company, as the inflows exceed the initial investment when considering the time value of money.

Big​ Steve's, makers of swizzle​ sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of ​$90,000 and will generate net cash inflows of ​$20,000 per year for 8 years. If the discount rate is 7 ​percent, then the​ project's NPV is ​$

Discover how to calculate the Net Present Value (NPV) for Big Steve's plastic stamping machine investment. With an initial outlay of $90,000 and cash inflows of $20,000 per year over 8 years, and a 7% discount rate, learn how to solve for the project's NPV, estimated at approximately $29,426.

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