A bakery in Champaign, IL is considering the purchase of a $20,000 espresso machine. The coffee maker has an economic life of seven years and will be fully depreciated by the straight-line method. The machine will produce 10,000 cups of coffee per year, with each costing $3.00 to make (including labor costs) and priced at median price of $4.50. Assume that the discount rate is 18 percent and the tax rate is 21 percent. Should the bakery make the purchase?

Answer rating: 100% (QA)

To determine whether the bakery should make the purchase of the espresso machine we need to calculate the net present value NPV of the investment Here... View the full answer