Mitchell Company is considering an investment in a new machine. Managers at the company are uncertain about the economic life of the machine, because of the speed of innovation in the technology. The machine requires an investment of $1.60 million. After-tax cash flows are estimated to be $455,711 each year the machine is operating (and not obsolete). The company uses a 14 percent discount rate in evaluating capital investments. Use Exhibit A.9. Required: What is the minimum economic life of the machine (in whole years) that would be required for it to have a positive net present value?

Required:

What is the minimum economic life of the machine (in whole years) that would be required for it to have a positive net present value?

Minimum economic life

years