Practical question (PQ7)

Snowy Hills Lumber Ltd is considering purchasing a new wood saw that costs $50 000. The saw will generate revenues of $120,000 per year for 5 years. The cost of materials and labour needed to generate these revenues will total $68,000 per year, and other cash expenses will be $14,000 per year. The machine is expected to will be depreciated on a straight-line basis over 5 years to zero. Snowy Hills Lumber's opportunity cost of capital is 12%. Should the company purchase the saw? Explain why or why not.