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XYZ Corporation is considering buying a new machine for $100,000. The machine will be good for 4 years and will allow the company to process
- XYZ Corporation is considering buying a new machine for $100,000. The machine will be good for 4 years and will allow the company to process and sell an additional 55,000 units per year at $4 per unit. Variable costs will be $1.50 per unit. Fixed costs will be $10,000 per year. This project will require an upfront investment in inventory of $20,000 that will be reclaimed at the end of the project. Depreciation will be straight line with no salvage. The tax rate is 30% and the required return is 20%.Based on this given information, would you recommend investing in the project. Show all your calculations.
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