Problem:
You have been assigned to purchase a new molding machine. One vendor offered a machine that will cost $200,000, with an estimated installation cost of $10,000. The machine has an expected life of 10 years, with an annual operating cost of $10,000. At the end of the machine life, there is an expected salvage value of $5000 your estimation shows an expected $45,000 of revenues directly related to the new machine during the first year, which is expected to increase by $2,000/year till the end of the machine's life. The company uses a 10% interest rate to evaluate equipment purchasing alternatives. Should you buy this machine? Please show your all workings.