Rush corporation is considering the purchase of a new

Reference no: EM13484477 , Length: 10

Rush Corporation is considering the purchase of a new machine that will last 5 years and require a cash outlay of $300,000. The firm has a 12 percent cost of capital rate and its after-tax risk-free rate is 9 percent. The company has expected cash inflows and certainty equivalents for these cash inflows, as follows:

Year	After-Tax Cash Inflows ($)	Certainty Equivalent
1	100,000	1.00
2	100,000	0.95
3	100,000	0.90
4	100,000	0.80
5	100,000	0.70

Calculate (a) the unadjusted NPV, and (b) the certainty equivalent NPV. (c) Determine if the machine should be purchased.

Reference no: EM13484477

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