discount rate 10%

6. CANCO manufactures a product using sophisticated machinery. A new machine has recently come on the market. This machine costs $10,000,000. If CANCO buys the machine it can sell the existing machine for $1,500,000. Management projects annual savings from use of the new machine to be $2,000,000 per year for years 1-4 and $1,000,000 for years 5-8. The new machine will have no residual value at the end of year 8 and will no longer produce any cost savings. Compute NPV of purchasing the new machine. SHOW THE WORK, NOT JUST THE ANSWER. YOU CAN USE FACTORS FROM THE APPENDIX