Question:
Coffee Company can buy new coffee machines for $4,500,000. The coffee machines will have a useful life of 10 years and have no salvage value. It is expected the coffee machines will produce a before tax profit of $1,200,000 per year. Assuming straight line depreciation is used, a tax rate of 45% and a cost of capital of 10% what is the Net Present Value (NPV) of purchasing the new coffee machines?