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Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $330,000 per year. You believe the
Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $330,000 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 $1,850,000. The cost of the machine will decline by $120,000 per year until it reaches $1,250,000, where it will remain.
If your required return is 12%, what is the NPV today and what will it be for 6 consecutive years?
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