A new machine cost $72,000. This cost will be depreciated prime cost to zero over 4 years. The new photocopier is expected to be worth $40,000 in 4 years. The new photocopier would save us $70,000 per year before taxes and operating costs. An old photocopier was purchased 3 years ago for $50,600 and it is being depreciated prime cost to zero over 8 years. If the old photocopier were to be sold today, it is reasonable to expect a salvage value of $30,000. 

If we require a 8% pa return after tax, what is the NPV of the purchase? Assume that tax is paid in the year after the year of income.

Answer rating: 100% (QA)

The net present value NPV of the purchase is 15781188 Here is the calculation Present value of the c... View the full answer