Your company is deciding whether to invest in a new machine. The new machine will increase cash
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Question:
Your company is deciding whether to invest in a new machine. The new machine will increase cash flow $280,000 per year. You believe the technology used in the machine has a 10 year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1,800,000. The cost of the machine will decline by $185,000 per year until it reaches $1,060,000, where it will remain.
If your required return is 13 percent which year should you purchase the machine?
What is the NPV if you purchase the machine in the optimal year?
Related Book For
Corporate Finance Core Principles and Applications
ISBN: 978-0077905200
3rd edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
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