You can invest in a machine that costs 500000 you can


Determine Present Value

 

You can invest in a machine that costs $500,000. You can expect revenues net of any expense, except machine costs, of $150,000 at the end of each year for five years. You will subcontract the maintenance costs at a rate of $20,000 a year, to be paid at the beginning of each year. You expect to get $100,000 from selling the machine at the end of that fifth year. All these revenues and costs are after tax, as is the 10 percent cost of capital. Should you buy the machine?

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Financial Management: You can invest in a machine that costs 500000 you can
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