Option to Wait Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $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 $1,500,000. The cost of the machine will decline by $125,000 per year until it reaches $1,000,000, where it will remain. If your required return is 12 percent, should you purchase the machine? If so, when should you purchase it?

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