Genetics Engineering is considering the purchase of some new equipment that will cost $300,000 installed. The...

 

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Genetics Engineering is considering the purchase of some new equipment that will cost $300,000 installed. The equipment will produce a product that must be FDA approved and this will require at least two years. Year 1 and Year 2, the company will have net cash outflow of $110,000 and $50,000. Year 3 to 5, the company will generate net cash inflows of $200,000, $240,000, and $330,000. At the end of 5 years the equipment and the product will be obsolete. If the firm's costs of capital is 14%, should they invest in the new equipment? Genetics Engineering is considering the purchase of some new equipment that will cost $300,000 installed. The equipment will produce a product that must be FDA approved and this will require at least two years. Year 1 and Year 2, the company will have net cash outflow of $110,000 and $50,000. Year 3 to 5, the company will generate net cash inflows of $200,000, $240,000, and $330,000. At the end of 5 years the equipment and the product will be obsolete. If the firm's costs of capital is 14%, should they invest in the new equipment?

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