Question - Diamond Company is considering purchasing a machine that would cost $756,000 and have a useful life of 8 years. The machine would reduce cash operating costs by $132,632 per year. The machine would have a salvage value of $151,200 at the end of the project.
Compute:
a. Net present value
b. Internal rate of return
c. Profitability index
d. Payback period
e. Simple rate of return
f. Should the company purchase the machine? Why or why not?