The company should or should not buy the machine

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Reference no: EM131609606

Rocky Mountain Lumber, Inc., is considering purchasing a new wood saw that costs $55,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $3,300 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Rocky Mountain’s tax rate is 34 percent, and its opportunity cost of capital is 11.80 percent.

NPV $___________

The company should or should not buy the machine?

Reference no: EM131609606

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