Compute the net present value

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Reference no: EM13765069

The BCR corporation is considering buying a new machine at a cost of $400,000. They expect to have an annual cost savings of $120,000 at the end of each year for five years. They expect to incur maintenance insurance costs of $15,000 at the time of purchase and $15,000 at the end of each year for the next four years. They expect to get $80,000 from selling the machine at the end of the fifth year. All of these revenues and costs are after tax, as is the corporations cost of capital’ of 8%. Compute the net present value. Is this purchase financially justified?

Reference no: EM13765069

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