Question: A company is considering installing a new machine that initially costs $800,000, with a further outlay of $100,000 at the end of each of years

A company is considering installing a new machine that initially costs $800,000, with a further outlay of $100,000 at the end of each of years 3 and 6 for maintenance.

The salvage value is $75,000 at the end of 10 years.

Expected returns are $125,000 for each of the first 3 years and $175,000 for each of the remaining 7 years.

Should the company install the new machine if money is worth 9% compounded annually?

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