Your firm is considering buying a new machine. Here are the facts: the machine costs $92,215. Over the next 13 years (the life of the machine), the machine will generate annual revenues of $35,657. The annual cost of the goods sold (COGS) is $5,195 per year and other costs; selling, general, and administrative expenses (GS&A) are $2,721.5 per year. Depreciation on the machine is straight-line over 13 years (that is: $7,093.46 per year). At the end of 13 years, the machines salvage value (or terminal value) is zero. If the firms tax rate is 28.2% and the firms discount rate for projects of this kind is 14.72%, what is NPV for this project?

Answers:

a. $31,705.12

b. $38,997.30

c. $33,290.38

d. $35,509.74

e. $31,071.02

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