We are a new company, Bayburt Corp., we had expected average sales but demand has passed our expectations. Actually, our sales have freaked out. We dont know how to control our sales. Our finance managers quitted under these financial reports. The public are crazy about our razor blades. They are making queues in front of the barber shops and supermarkets. It was impossible to meet this crazy demand. Until, one day I saw a razer blade machine commercial on local television.

We are at the decision point. The machine enables Bayburt Corp. to sell 5000 first year and we expect to increase our sales by 10 percent razor blades for 6 years after the production of first year. The proposed selling price in the first year is 2 TL per razor blades. Bayburt Corp. has expected a 25 percent increase in selling price with the marketing department. The expenses of providing the razor total 6000 TL and are expected to increase with inflation of 12%.

This machine has 50,000 TL price. The investment in equipment would be depreciated for tax purposes straight line over 7 years to 8000 TL salvage value.

Our company expects to have working capital as an average 15% of current years sales.

What is your recommendation regarding the contribution of that machine? Should Bayburt Corp. buy this machine if the discount rate for the project is 12 percent and the tax rate is 20 percent?