A corporation is considering purchasing a machine that will save $200,000 per year before taxes. The cost of operating the machine, including maintenance, is $80,000 per year. The machine, costing $150,000, will be needed for five years after which it will have a salvage value of $25,000. If the firm wants a 15% rate of return before taxes, what is the net present value of the cash flows generated from this machine?

A corporation is considering purchasing a machine that will save $200,000 per year before taxes. The cost of operating the machine, including maintenance, is $80,000 per year. The machine, costing $150,000, will be needed for five years after which it will have a salvage value of $25,000. If the firm wants a 15% rate of return before taxes, what is the net present value of the cash flows generated from this machine?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 3E

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