Flatte Restaurant is considering the purchase of a $10,900 soufflé maker. The soufflé maker has an economic life of four years and will be fully depreciated by the straight-line method. The machine will produce 2,450 soufflés per year, with each costing $3.00 to make and priced at $5.70. Assume that the discount rate is 12 percent and the tax rate is 34 percent.
What is the NPV of the project?
Should the company make the purchase?