Question
A company is considering purchasing a new machine that costs $150,000. The machine is expected to have a useful life of 10 years and a
A company is considering purchasing a new machine that costs $150,000. The machine is expected to have a useful life of 10 years and a salvage value of $20,000. The company expects the machine to generate incremental net cash flows of $35,000 per year over the next 10 years. The company's required rate of return is 12%.
a) Calculate the net present value (NPV) of the investment in the new machine.
b) Calculate the internal rate of return (IRR) of the investment in the new machine.
c) Should the company invest in the new machine based on the NPV and IRR? Why or why not?
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Intermediate accounting
Authors: J. David Spiceland, James Sepe, Mark Nelson
7th edition
978-0077614041, 9780077446475, 77614046, 007744647X, 77647092, 978-0077647094
