Deciding whether to invest in new machine

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Reference no: EM131346525

Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $325,000 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 $1,750,000. The cost of the machine will decline by $105,000 per year until it reaches $1,225,000, 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?

A. Today

B. One year from now

C. Two years from now

Reference no: EM131346525

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