00:01
So, here in a question to determine if the change should buy a new million new milling machine.
00:09
We need to calculate the net present value, which is denoted by npv.
00:21
So, for this some things are given in a question first.
00:24
Let's let calculate the present value of the annual after -tax cash flow using the formula of present value of an annuity.
00:35
So, we use the formula cf multiplied by 1 minus 1 plus r to the power n divided by r.
00:51
So, let's put the values here.
00:53
When we put the values given from the question, we know see cf is a annual after -tax cash flow r is project cost capital and is project life.
01:05
So, where did we put the values? $19 ,300 multiply by 1 minus 1 plus r, which is 0 .12 to the power n, which is minus 10 divided by r, which is 0 .12 when we calculated further.
01:28
We got $19 300 multiply with 1 minus 0 .3 22 divided by 0 .12 further.
01:41
When we simplifying it, we got $19 ,300 multiply with 0 .678 divided by 0 .12 is equals to when we solving it.
01:58
We got the final value, which is 1 0 8 2 6 1 point six seven dollar.
02:10
So, this is the present value.
02:13
Okay of annual rate after cash.
02:17
Now next we have to calculate present value of the initial cost.
02:26
So, let's be calculate present value of cost for this what we have to use the formula cost of new milling machine divided by 1 plus r to the power and let's put the values here...