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Southsiae Junk Yard needs to buy a car smasher. The machine would add the following revenues to the business over the next three years: Year
Southsiae Junk Yard needs to buy a car smasher. The machine would add the following revenues to the business over the next three years: Year 1 Cash savings-$30,000 Year 2 Cash savings plus additional scrap sales -$40,000 Year 3 Cash savings plus additional scrap sales -$55,000 The initial cost of the machine is SI 00.000. At the end of three years, its salvage value is estimated at $20,000. The firm has a cost of capital of 12% Required: Using the net present value method, determine whether the company should purchase the machine. (Ignore income tax effects.) Show Computations
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