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Should Pepper and Spoon buy the new machine

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Reference no: EM132559026

Question - Pepper & Spoon is a boutique ice cream store in Seattle. They are considering purchasing a machine that enables them to efficiently transfer their ice cream into pints that are suitable for curbside pickup. They are contemplating the purchase of this machine on July 1st 2020.

The following details are given:

The cost of the machine is around $30,000

The machine has an estimate useful life of 2 years

The following revenue and cost estimates have been calculated:

First 12 months:

$2,000 in maintenance costs

$15,000 additional revenue

Second 12 months:

$2,000 in maintenance costs

$7,000 in additional revenue

The salvage value is estimated to be $15,000.

Their cost of capital is 7%.

Based on your NPV analysis and calculations, should Pepper & Spoon buy the new machine?

Reference no: EM132559026

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