Morales Company is planning to invest in high-tech equipment costing $580,000, which has a useful life of
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Morales Company is planning to invest in high-tech equipment costing $580,000, which has a useful life of 6 years and a $40,000 salvage value. The investment is expected to produce net cash (after taxes) operating savings of $120,000 per year. A repair of $10,000 is anticipated at the end of 2 years. The corporate salaries are $55,000. The company uses straight-line depreciation. The desired rate of return is 10%.
a. What is the net present value if the cost of capital is 10%?
b. Should the machine be purchased?
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Managerial Accounting
ISBN: 9780137689453
1st Edition
Authors: Jennifer Cainas, Celina J. Jozsi, Kelly Richmond Pope
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