Value of option to wait two years to purchases the machine

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Reference no: EM131888810

Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $336382 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1,760,000. The cost of the machine will decline by $110,000 per year until it reaches $1,320,000, where it will remain. The required return is 15%.

What is the value of the option to wait 2 years to purchases the machine? (Round answer to 2 decimal places. Do not round intermediate calculations)

Reference no: EM131888810

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