Question: Flatte Restaurant is considering the purchase of a $10,200 soufflé maker. The soufflé maker has an economic life of five years and will be fully depreciated by the straight-line method. The machine will produce 2,100 soufflés per year, with each costing $2.50 to make and priced at $5.20. Assume that the discount rate is 12 percent and the tax rate is 35 percent.
What is the NPV ?
Should the company make the purchase?