Deciding when to invest in new machine

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Reference no: EM131077845

Your company is deciding when to invest in a new machine. The new machine will increase cash flow by $240,000 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 $1,200,000. The cost of the machine will decline by $120,000 per year until it reaches $720,000, where it will remain. Your required return is 8 percent. In which year should you purchase the machine?

Reference no: EM131077845

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