Question: You're considering buying a new machine. This will cost $20 million and have a 10 year useful life. It will be used in a project

You're considering buying a new machine. This will cost $20 million and have a 10 year useful life. It will be used in a project lasting 8 years. The machine will generate sales of $4 million per year with $800,000 a year in operating expenses. You will sell the machine for $5 million at the end of the project. You must make an initial investment in net working capital of $300,000. Find the NPV of the machine at a cost of capital of 6%. The tax rate is 20%. Use straight line depreciation.

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