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Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $326,000 per year. You believe
Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $326,000 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1,760,000. The cost of the machine will decline by $111,000 per year until it reaches $1,205,000, where it will remain. If your required return is 13 percent, calculate the NPV if you purchase the machine today. What is the NPV if you wait to purchase the macine until each year indicated below? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Purchase today Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Should you purchase the machine? Yes No If so, when should you purchase it? Today One year from now Two years from now
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