ig​ Steve's, makers of swizzle​ sticks, is considering the purchase of a new plastic stamping machine.  This investment requires an initial outlay of 

​$110,000 

and will generate net cash inflows of 

​$17,000 

per year for 

9

years.

**a.**  What is the​ project's NPV using a discount rate of 

9

percent​? 

 Should the project be​ accepted?  Why or why​ not?

To calculate the project's Net Present Value (NPV), we use the following formula:

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

Where:
- $ C_0 $ is the initial investment (outlay).
- $ C_t $ is the annual cash inflow.
- $ r $ is the discount rate.
- $ t $ is the year.
- The summation runs for the number of years over which the cash inflows are received.

Given:
- Initial investment ($ C_0 $) = \$110,000
- Annual cash inflow ($ C_t $) = \$17,000
- Number of years ($ t $) = 9
- Discount rate ($ r $) = 9% or 0.09

Let's calculate the NPV.

\[
NPV = \left( \sum_{t=1}^{9} \frac{17,000}{(1 + 0.09)^t} \right) - 110,000
\]

I'll compute the NPV now.The Net Present Value (NPV) of the project is approximately **-\$8,080.80**.

### Should the project be accepted?
No, the project should not be accepted because the NPV is negative. A negative NPV indicates that the project's cash inflows, discounted at the given rate, are not enough to cover the initial investment, leading to a net loss in present value terms.

Would you like more details or have any questions?

Here are some related questions to consider:
1. What is the Internal Rate of Return (IRR) for this project?
2. How would the NPV change if the discount rate were 7%?
3. What is the Payback Period for this investment?
4. How does NPV compare to other methods like IRR or Payback Period?
5. Can NPV be positive if cash inflows increase by 10% annually?

**Tip:** A project is generally considered acceptable if the NPV is positive because it means the project is expected to generate more value than its cost in today's terms.

Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $110,000 and will generate net cash inflows of $17,000 per year for 9 years. What is the project's NPV using a discount rate of 9 percent? Should the project be accepted? Why or why not?

Learn how to calculate the Net Present Value (NPV) for a plastic stamping machine investment, requiring a $110,000 initial outlay with annual cash inflows of $17,000 over 9 years. Using a 9% discount rate, find out if the project should be accepted based on financial analysis. Suitable for undergraduate finance students.

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