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BSU Inc. wants to purchase a new machine for $44, 300, excluding $1, 500 of installation costs. The old machine was bought five years ago
BSU Inc. wants to purchase a new machine for $44, 300, excluding $1, 500 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2, 200 and BSU Inc. expects to sell it for that amount. The new machine would decrease operating costs by $10,000 each year of its economic life. The straight line depreciation method would be used for the new machine, for a six year period with no salvage value. (a) Determine the cash payback period. Cash Payback period 4.49 (b) Determine approximate internal rate of return. Internal rate of return % (c) Assuming the compare has a required rate of return of 8%, determine whether the new machine should be purchased. The Investment be accepted
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