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Challenge 3: Calculate NPV using table values

Challenge 3: Calculate NPV using table values - Microsoft Excel Tutorial

From the course: Investment Evaluation

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Challenge 3: Calculate NPV using table values

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- [Instructor] For this challenge, I'm using exercise file 03_03_Challenge3. What I want you to do is determine whether Kevin's company should invest in a project, based on the NPV calculation that you come up with. Imagine that Kevin is buying a piece of machinery for his construction company, Meet and Dot. It's a laser alignment machine that gives markings on ceilings for where recess lighting should be installed. It's quite nifty stuff, really. Anyway, it has an overhead cost of $1500. Not only that, but it's definitely gonna need an upgrade in five years, and that's gonna cost another $1000. However, Kevin expects that the piece of machinery will generate net cash flows of about $2000 per year for the next 10 years. Imagine the discount rate is 8%. According to our handy dandy table, the present value of $1 for five years at 8% is .6806. The present value for an ordinary annuity of $1 for 10 years at 8% is 6.7101. Calculate the net present value, and decide whether Kevin should…

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