The management of Origami Company, a wholesale distributor of beachwear products, is considering purchasing a $30,000 machine that would reduce operating costs in its warehouse by $5,000 per year. At the end of the machine’s eight-year useful life, it will have no scrap value. The company’s required rate of return is 11%.
Ignore income taxes.
1. Determine the net present value of the investment in the machine.
2. What is the difference between the total undiscounted cash inflows and cash outflows over the entire life of the machine?