Question
Bridgeport corporation is considering the purchase of a new bottling machine. The machine cost 220,000 and has a estimated useful of 8 years with zero
Bridgeport corporation is considering the purchase of a new bottling machine. The machine cost 220,000 and has a estimated useful of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual cash Flow of 40,000. Management also believes that the new machine will save the company money because it is expected to te more reliable than other machines, and thus will reduce downtime. Assume a discount rate of 10%. (5.33493)
Calculate the present value and how much would the reduction in downtime have to be worth in order for the project to be aceptable?
The present value of reduction in downtime is
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