Finance Chapters 11 and 24

Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $306,000 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1, 710,000. The cost of the machine will decline by $110,000 per year until it reaches $1, 160,000, where it will remain. If your required return is 12 percent, calculate the NPV today. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) If your required return is 12 percent, calculate the NPV for the following years. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Negative amounts should be indicated by a minus sign.) Should you purchase the machine? Yes No If so, when should you purchase it? Today One year from now Two years from now