Suppose you are given the following data about a new piece of machinery your firm is thinking of purchasing:

Year Estimated Cash Flows

$1$ $$25,000$

$2$ $$15,000$

$3$ $$10,000$

If the upfront cost of purchasing this machine is $$45,000$ and the current interest rate is $4$ percent, should your firm purchase this machine or not?

a$.$

yes

b$.$

no

c$.$

the firm would be indifferent as to whether or not it would purchase this machine

Answer rating: 100% (QA)

To decide whether the firm should purchase the machinery or not we need to compare the present value ... View the full answer