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A company is considering an investment (at time/year = 0) in a machine that produces large plastic boxes. The cost of the machine is 41,455
A company is considering an investment (at time/year = 0) in a machine that produces large plastic boxes. The cost of the machine is 41,455 dollars with zero expected salvage value. Annual production (in units) during the 3-year life of the machine is expected to be (starting at time = 1) 4,609, 8,388, and 10,073. The sale price per unit of the plastic boxes is 15 dollars in year one, and the price is then expected to increase by 9% per year. Production costs per unit will be 4 dollars in year one, and then production costs will increase by 3% per year. Depreciation on the machine is 11,755 dollars per year, the tax rate is 40% and the minimum acceptable rate of return is 6% percent per year, compounded annually.
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