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16. Suppose your company could purchase a machine for $600,000 that would lead to increased profits of $175,000 per year for the next 5 years.
16. Suppose your company could purchase a machine for $600,000 that would lead to increased profits of $175,000 per year for the next 5 years. The profits are received at the end of year 1 and the end of the 4 years after that. Based on the interest rate for your company to borrow (7%) and a self-imposed return on investment rate (5%), you have a discount rate of 12%. Should you purchase this machine? Show your calculations. Hint: (1.12)2 = 1.254 (1.12) = 1.404 (1.12)* = 1.572 (1.12) = 1.761 (1.12) = 1.972
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