Question
A firm is considering the purchase of a $500,000 machine for its business. The machine is expected to increase sales by $237,000. The machine will
A firm is considering the purchase of a $500,000 machine for its business. The machine is expected to increase sales by $237,000. The machine will have a 5 year useful life and will be depreciated over 5 years via the straight line method. There is no salvage value. The firm has a required rate of return of 10% for all new capital investments. The project's pro forma income statement is shown below: Sales $237,000 Total Costs 137,000 Depreciation 100,000 _____________ EBT $0 Taxes 0 ______________ Net Income $0 The firm should: Group of answer choices Accept the project because the NPV is $2,543 Accept the project because the NPV is $10,011 Reject the project because the NPV is negative $120,921 Reject the project because the NPV is negative $500,000 It doesnt matter since the NPV is 0 Cant tell since there isnt enough information
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