Problem
A company is considering investing in some new equipment. The new equipment will deliver cost savings of $100,000 in the first year and $130,000 in the second year, before being sold for $56,000 at the end of the second year. It will cost $230,000 to buy and install the new equipment, which will be paid on purchase.
Assuming a cost of capital equal to 11.4%, estimate the NPV of the investment in new equipment.