Question: A corporation is considering purchasing a machine with an expected eight-year life and will generate for the firm $11,000 per year in net operating income

A corporation is considering purchasing a machine with an expected eight-year life and will generate for the firm $11,000 per year in net operating income before taxes. Using the straight-line method, its anticipated salvage value is $12,000. The firm has a 21% marginal tax rate and the required return for this project is 12%. A salesman wants to negotiate the price of machine. What is the maximum price the company is willing to pay? (Hint: Change income for eight years.)

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57929

53416

50000

57117

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