1. Net Present Value Analysis with Taxes.Morales Company would like to purchase a new machine for $100,000. The machine will have a life of 5 years with no salvage value, and is expected to generate annual cash revenue of $50,000. Annual cash expenses, excluding depreciation, will total $24,000. The company uses the straight-line depreciation method, has a tax rate of 40 percent, and requires a 12 percent rate of return.
2. Required:
3. Find the net present value of this investment using the format presented inFigure 6.7. Round to the nearest dollar.
4. Should the company purchase the machine? Explain.