(c) Net Present Value (or Cash Flow Problem)

A company is considering replacing a machine. It will require an initial cash outlay of $130,000 and then is expected to generate cash flows of +$7,000, another outlay of -$10,000 in year two, three years of +$20,000 cash flows, a cash flow of +$12,000 another outlay of -$8,000 and a final cash flow of +$178,500. If the cost of funds for the company is estimated at 10%, what is the Net Present Value?

Should the machine be replaced?

Cash Flow Diagram or Timeline (where negative is cash out flow)

Using HP 10bII