Question
Your firm is considering buying a new machine. Here are the facts: the machine costs $86,900. Over the next 10 years (the life of the
Your firm is considering buying a new machine. Here are the facts: the machine costs $86,900. Over the next 10 years (the life of the machine), the machine will generate annual revenues of $30,396.5. The annual cost of the goods sold (COGS) is $6,384 per year and other costs; selling, general, and administrative expenses (GS&A) are $2,533.9 per year. Depreciation on the machine is straight-line over 10 years (that is: $8,690 per year). At the end of 10 years, the machine’s salvage value (or terminal value) is zero. If the firm’s tax rate is 22.15% and the firm’s discount rate for projects of this kind is 11.85%, what is NPV for this project?
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Engineering Economy
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
15th edition
132554909, 978-0132554909
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