What is the value to purchases the machine

Reference no: EM132208197

Questions -

Q1) Your Company is deciding whether to invest in a new machine. The new machine will increase cash flow by $331734 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 NPV if the company purchases the machine today?

Q2) Your Company is deciding whether to invest in a new machine. The new machine will increase cash flow by $328366 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 14%. What is the NPV if the company decides to wait 2 years to purchases the machine.

Q3) Your Company is deciding whether to invest in a new machine. The new machine will increase cash flow by $327006 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 17%. What is the value of the option to wait 2 years to purchases the machine.

Reference no: EM132208197

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