Company XYZ is considering investing in a new machine that will cost $15,000. The machine will allow the firm to generate sales of $50,000 per year. The machine has a useful life of three years. Operating expenses are projected to be 70 percent of total sales. Assume straight-line depreciation over three years to a zero salvage value. The market value of the machine in three years is estimated to be $5,000. The marginal tax rate of the firm is 35 percent. 

If the discount rate is 6 percent, should the investment be undertaken?

Answer rating: 100% (QA)

To determine whether the investment should be undertaken we need to calculate the net present value ... View the full answer