Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $323,000 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 $1,730,000. The cost of the machine will decline by $105,000 per year until it reaches $1,205,000, where it will remain. If your required return is 13 percent, calculate the NPV if you purchase the machine today. What is the NPV if you wait to purchase the macine until each year indicated below? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Purchase today Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $323,000 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 $1,730,000. The cost of the machine will decline by $105,000 per year until it reaches $1,205,000, where it will remain. If your required return is 13 percent, calculate the NPV if you purchase the machine today. What is the NPV if you wait to purchase the macine until each year indicated below? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Purchase today Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Name: Your company is deciding whether to invest in a new machine. The new
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Description: Your company is deciding whether to invest in a new machine. The new machine willincrease cash flow by $323,000 per year. You believe the technology used in themachine has a 10-year life; in other words, no matter when you purchase the machine, itwi

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 4P

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