A company is considering the purchase of a new machine, which costs 4,000 YTL. 2,000 YTL of this money is financed from the firm's equity funds and the remaining 2,000 YTL of this money will be borrowed at 12%, with repayment of principal and interest in 5 equal installments. The machine has an economic life of 5 year and estimated salvage value of 0 YTL at the end of the economic life. Annual operating and maintenance expenses are350YTL and the revenue generated will be 1,500 YTL/year. SLM is used and the income tax rate is40%. If MARR is20%, determine whether the firm should purchase this machine or not?

Answer rating: 100% (QA)

To determine whether the firm should purchase this machine we need to calculate the net present valu... View the full answer