Deciding whether to invest in new machine

Assignment Help Financial Management

Reference no: EM131346386

Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $326,000 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 $1,760,000. The cost of the machine will decline by $111,000 per year until it reaches $1,205,000, where it will remain.

If your required return is 13 percent, calculate the NPV today.

If your required return is 13 percent, calculate the NPV for the following years. Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Should you purchase the machine?

If so, when should you purchase it?

Today

One year from now

Two years from now

Reference no: EM131346386

Questions Cloud

What is the expected risk premium for this stock : A stock is expected to earn 22 percent in a boom economy, 13.00 percent in a normal economy, and lose 30 percent in a recessionary economy. There is a 17 percent chance the economy will boom and a 63 percent chance the economy will be normal. What is..

What is standard deviation of these returns : A stock is expected to earn 53 percent in a boom economy and 26 percent in a normal economy. There is a 39 percent chance the economy will boom and a 61.0 percent chance the economy will be normal. What is the standard deviation of these returns?

What is bond current price if the yield to maturity : A bond has 8 years to maturity, a 7 percent coupon, a $1,000 face value, and pays interest semiannually. What is the bond's current price if the yield to maturity is 6.91 percent?

Statements regarding conventional finance-behavioral finance : Which of the following statements regarding conventional finance and behavioral finance is true?

Deciding whether to invest in new machine : Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $326,000 per year. You believe the technology used in the machine has a 10-year life; The machine is currently priced at $1,760,000. The cost of t..

What is the expected npv for this business venture : Use simulation to analyze the Sound's Alive problem. Based on your results, what is the expected net profit for the years 2004 through 2007, and what is the expected NPV for this business venture?

Calculate each stock coefficient of variation : Your research has determined the following information about the common stock of two particular firms. Explain what is meant by the stock’s “Expected Return”. Calculate each stock’s coefficient of variation.

What is the present value of the offer if the discount rate : Tom Adams has received a job offer from a large investment bank as a clerk to an associate banker. His base salary will be $47,000. He will receive his first annual salary payment one year from the day he begins to work. What is the present value of ..

What was last year dividend per share : After a 4-for-1 stock split, Perry Enterprises paid a dividend of $1.70 per new share, which represents a 8% increase over last year's pre-split dividend. What was last year's dividend per share?

User Account

All Pages