Your company is deciding whether to invest in a new machine


Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $311,000 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 $1,600,000. The cost of the machine will decline by $96,000 per year until it reaches $1,120,000, where it will remain. If your required return is 14 percent, calculate the NPV today. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ If your required return is 14 percent, calculate the NPV if you wait to purchase the machine until the indicated year. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) NPV 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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Financial Management: Your company is deciding whether to invest in a new machine
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