Purchase of a new machine that will produce widgets

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Reference no: EM13890407

Tocserp is considering the purchase of a new machine that will produce widgets. The widget maker will require an initial investment of $10,000 and has an economic life of five years and will be fully depreciated by the straight line method. The machine will produce 1,600 widgets per year with each costing $2.00 to make. Each will be sold at $4.50. Assume Tocserp uses a discount rate of 14 percent and has a tax rate of 34 percent. What is the NPV of the project and should Tocserp make the purchase.

Yes, NPV = 1397.83

No, NPV = -356.56

Yes, NPV = 3732.32

Reference no: EM13890407

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