Question
A company is evaluating a proposal to purchase a forklift. The base price of the machine is $107,500 and an additional $12,500 in modifications would
A company is evaluating a proposal to purchase a forklift. The base price of the machine is $107,500 and an additional $12,500 in modifications would be needed to tailor it to the specific use in the company. The machine would sell for $55,000 after 3 years. Purchasing the forklift would have no effect on revenues, but it is expected to save the company a monthly gross-tax operating cost savings of $4,000, primarily labor. The minimum attractiveness rate being equal to 12% per year. Do you think the machine should or should not be purchased? Because? To answer this question, calculate the IRR and NPV.
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