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Q6: Suppose that a machine costing $1 million will wear out in five years. Suppose also that widgets produced by that machine will bring in
Q6: Suppose that a machine costing $1 million will wear out in five years. Suppose also that widgets produced by that machine will bring in sales of $1 million a year, and the materials and labor costs for producing the widgets will amount to $700,000 a year. From the accounting perspective, disregarding general administrative expenses, interest payments and taxes, net profits generated per year by running the machine is not $300,000, but $_(a) , because (b) On the other hand, from the finance perspective, one must compare the initial $1 million investment in the machine with the present value of cash generated every year, which is $_(c) per year. If a discount rate of 20% is used to evaluate the investment, the net present value is $_(d) _(round to the nearest unit), and it is (e) to pursue the investment
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