Project evaluation, Kinky Copies may buy a high volume

Project evaluation

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Reference no: EM1359671

Please help me determine the solution as to why or why not Kinky should buy the machine. Break it down for me so I would have a clear understanding.

Kinky Copies may buy a high-volume copier. The machine cost $100,000 and will be depreciated straight-line over 5 years to a salvage value of $20,000. Kinky anticipates that the machine actually can be sold in 5 years for 30,000. The machine will save $20,000 a year in labor costs but will require an increase in working capital, mainly paper supplies, of $10,000. The firms marginal tax rate is 35 percent, and the discount rate is 8 percent. Should Kinky buy the machine.

Reference no: EM1359671

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