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Artistic Adobes is considering growing its business by adding a paint machine that costs $90,000. The machine will generate an additional $29,000 in before-tax operating
Artistic Adobes is considering growing its business by adding a paint machine that costs $90,000. The machine will generate an additional $29,000 in before-tax operating income (excluding depreciation) for the next 5 years. At the end of five years, the machine can be sold for $8,000. The machine falls into the MACRS 3-year class. Artistic's tax rate is 34%, and its required rate of return is 15 percent. Should Artistic purchase the machine? What is the net present value and internal rate of return?
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