Question
Creighton Industries is considering the purchase of a new strapping machine which will cost $120,000 plus the additional 7,500 to ship and install.The new machine
Creighton Industries is considering the purchase of a new strapping machine which will cost $120,000 plus the additional 7,500 to ship and install.The new machine will have a 5-year useful life and will be depreciated tozero using the straight line method. The machine is expected to generate new sales of $25,000 per yearand is expected to save $17,000 in labor and electrical expenses over the next 5 years.The machine is expected to have a salvage value of $30,000. Creighton uses 13.5% discount rate for capital budgeting purposes and the firms's income tax rate is 40%. What is the machine's NPV?
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