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Contemplating the purchase of a new machine

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Reference no: EM131113012

Boston Company is contemplating the purchase of a new machine on which the following information has been gathered:

  • Cost of the machine $38,900
  • Annual cash inflows expected $10,000
  • Salvage value $ 5,000
  • Life of the machine 6 years

The company's discount rate is 16%, and the machine will be depreciated using the straight-line method. Given these data, the machine has a net present value of:

a. -$26,100.

b. -$23,900.

c. $0.

d. +$26,100.

Reference no: EM131113012

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