Question
ABC Corp is considering buying a new machine for $440,000. The new machine has an 8-year life. Assume straight-line depreciation. The new machine will allow
ABC Corp is considering buying a new machine for $440,000.
The new machine has an 8-year life. Assume straight-line depreciation.
The new machine will allow ABC to save $74,000/year.
ABC will sell an old machine for $52,000. The sale will take place on the same day the new machine is bought.
The old machine has an NBV = 18,000. Two years remain on the old machines' depreciable life.
The new machine will require an overhaul in year 5 = $17,000.
ABC has a 21% tax rate.
What is the net present value of the investment using a 6% discount rate?
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